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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 30, 1998
Capital Senior Living Corporation
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(Exact name of registrant as specified in its charter)
Delaware 1-17445 75-2678809
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(State or other jurisdiction of (Commission File (IRS Employer
incorporation) Number Identification No.)
14160 Dallas Parkway, Suite 300, Dallas, Texas 75240
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (972) 770-5600
(Not Applicable)
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(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets
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On September 30, 1998, Capital Senior Living Corporation (the
"Company"), through Capital Senior Living Properties 2 - NHPCT, Inc.
("Purchaser"), an indirect wholly-owned subsidiary, completed the acquisition of
four senior living communities from NHP Retirement Housing Partners I Limited
Partnership ("NHP") for cash consideration of $40,650,000, pursuant to the terms
of the Asset Purchase Agreement, attached hereto as Exhibit 2.1, dated as of
July 24, 1998, by and between NHP and Capital Senior Living Properties, Inc. The
funds for the transaction were provided from working capital of the Company and
from the proceeds of a loan pursuant to the terms of the Loan Agreement,
attached hereto as Exhibit 2.3, dated as of September 30, 1998, by and between
Purchaser and Lehman Brothers Holdings Inc. d/b/a Lehman Capital, a division of
Lehman Brothers Holdings Inc.
The senior living communities acquired by the Company are The Atrium of
Carmichael in Carmichael, California; Crosswoods Oaks in Citrus Heights,
California; The Heatherwood in Southfield, Michigan; and The Veranda Club in
Boca Raton, Florida. Capital Senior Living, Inc. ("CSL"), a subsidiary of the
Company, has operated these communities under a long-term management contract
since 1992. The purchase price for the properties was determined by
independent appraisal. Personnel working at the property sites and certain home
office personnel who perform services for NHP are employees of CSL. NHP
reimburses CSL for the salaries, related benefits, and overhead reimbursements
of such personnel. Capital Realty Group Brokerage, Inc., a company wholly-owned
by Messrs. Jeffrey L. Beck and James A. Stroud, the Chief Executive and Chief
Operating Officers of the Company, respectively, received a brokerage fee of
$1,219,500 related to this transaction, which was paid by NHP.
Item 7. Financial Statements and Exhibits
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(a) Financial Statements of business acquired.
The financial statements required are not included in this
Form 8-K Current Report, but will be filed not later than
seventy-five days after the date of this Form 8-K Current
Report.
(b) Pro forma financial information.
The pro forma financial statements required are not included
in this Form 8-K Current Report, but will be filed not later
than seventy-five days after the date of this Form 8-K
Current Report.
(c) Exhibits.
2.1 Asset Purchase Agreement, dated as of July 24, 1998, by and
between Capital Senior Living Properties, Inc. and NHP
Retirement Housing Partners I Limited Partnership.
2.2 Assignment and Amendment to Asset Purchase Agreement,
effective as of September 29, 1998, by and among NHP
Retirement Housing Partners I Limited
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Partnership, Capital Senior Living Properties, Inc., and
Capital Senior Living Properties 2 - NHPCT, Inc.
2.3 Loan Agreement, dated as of September 30, 1998, by and between
Capital Senior Living Properties 2 - NHPCT, Inc. and Lehman
Brothers Holdings Inc. d/b/a Lehman Capital, a division of
Lehman Brothers Holdings Inc.
99.1 Press Release, dated October 5, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CAPITAL SENIOR LIVING CORPORATION
(Registrant)
Date: October 15, 1998
By: /s/ Lawrence A. Cohen
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Lawrence A. Cohen
Chief Financial Officer
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EXHIBIT INDEX
Sequentially
Exhibit No. Exhibit Description Numbered Page
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2.1 Asset Purchase Agreement, dated as of July 24, 1998,
by and between Capital Senior Living Properties, Inc.
and NHP Retirement Housing Partners I Limited
Partnership.
2.2 Assignment and Amendment to Asset Purchase
Agreement, effective as of September 29, 1998,
by and among NHP Retirement Housing Partners
I Limited Partnership, Capital Senior Living
Properties, Inc., and Capital Senior Living Properties
2 - NHPCT, Inc.
2.3 Loan Agreement, dated as of September 30, 1998, by
and between Capital Senior Living Properties 2 - NHPCT,
Inc. and Lehman Brothers Holdings Inc. d/b/a Lehman
Capital, a division of Lehman Brothers Holdings Inc.
99.1 Press Release, dated October 5, 1998
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement"), made and entered into
as of this 24th day of July, 1998 (herein called the "Effective Date"), by and
among NHP Retirement Housing Partners I Limited Partnership, a Delaware limited
partnership ("Seller") and Capital Senior Living Properties, Inc., a Texas
corporation, and its assigns ("Purchaser"),
WITNESSETH:
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WHEREAS, Seller is the owner of certain lots and parcels of land
situated in the States of California, Florida and Michigan, and more fully
described in Schedule A attached hereto (collectively referred to herein as the
"Land"); and
WHEREAS, Seller is the owner of five (5) retirement communities which
include four (4) retirement facilities located on the Land and listed in
Schedule B attached hereto (such four (4) facilities being sometimes referred to
herein separately as a "Facility" and collectively as the "Facilities"); and
WHEREAS, Seller desires to sell and Purchaser desires to purchase the
Land, the Facilities and certain other assets of Seller located on the Land or
used in or in connection with the operation of the Facilities, all upon the
terms and conditions hereinafter set forth.
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements herein contained, the parties hereto do hereby covenant and agree as
follows:
1. ACQUISITION OF ASSETS. Seller shall sell and deliver to Purchaser and
Purchaser shall purchase and accept from Seller, all of Seller's right, title,
benefit, and interest in and to the Land, Facilities and the assets (excluding
those assets listed on Schedule 1.1 hereto) of Seller used in or in connection
with the operation of the Facilities as of the Effective Date, together with
replacements thereof and additions thereto made between the Effective Date and
the Closing Date, (collectively referred to herein as the "Assets"), including,
without limitation, all assets described in the following categories:
1.1 The fee interest in the Land and the buildings (including without
limitation the Facilities), structures, erections, appurtenances, easements, and
improvements now thereon (collectively referred to herein as the "Premises") and
the fixtures belonging to Seller and used in connection therewith including, if
any, all venetian blinds, window shades, screens, screen doors, storm windows
and doors, awnings, shutters, furnaces, heaters, heating equipment, stoves,
ranges, oil and gas burners and fixtures appurtenant thereto, hot water heaters,
plumbing and bathroom fixtures, electric and other lighting fixtures, mantels,
outside television antennas, satellite dishes, fences, gates, trees, shrubs,
plants, air conditioning equipment, ventilators, garbage disposals, dishwashers,
washing machines and dryers.
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1.2 All vehicles, machinery, equipment, furniture, furnishings and
accessories of all kinds, whether owned or leased by Seller, used in connection
with the Facilities.
1.3 Seller's entire inventory used or maintained in connection with the
Facilities, including, but not limited to, food, pharmaceuticals, drugs,
cleaning materials, linens and medical and office supplies (the "Inventory").
1.4 To the extent transferable under federal or state law, all of the
patient, medical, clinical, historical, financial, and personnel records of the
Facilities, and all of the operating manuals, procedures manuals, training
manuals, and other books and records used by Seller in operating the Facilities.
1.5 To the extent transferable under state law, all licenses, permits,
certificates and franchises necessary to operate and conduct the business of the
Facilities and all waivers of any requirements pertaining to such licenses,
permits, certificates, and franchises.
1.6 All good will, registered or unregistered trademarks, trade or brand
names, service marks and similar intangible property pertaining to the
Facilities.
1.7 The exclusive right to use the trade names of each of the Facilities as
set forth on Schedule 1.7 hereto or any variation thereof, as part of the name
or in connection with the Facilities or any part thereof.
1.8 All surveys, environmental reports, plans, specifications, and
architectural renderings of the Facilities in the possession or control of
Seller.
Attached hereto as Schedule 1.2 is a comprehensive list (excluding the
assets described in Schedule 1.1 hereof) of the vehicles, fixtures, machinery,
equipment, furniture, and furnishings owned by Seller and used in or in
connection with the operation of the Facilities.
Attached hereto as Schedule 1.3 is a comprehensive list of all material
assets related to the operation of the Facilities which are leased by Seller.
2. CONSIDERATION. In consideration of the sale and transfer by Seller hereunder
of the Assets to Purchaser and of the agreement herein by Seller to perform each
of its other obligations hereunder, Purchaser shall pay to Seller an amount and
assume from Seller certain liabilities, in each case as set forth below:
2.1 Purchase Price. The aggregate purchase price for the Assets shall
be Forty Million Six Hundred Fifty Thousand and 00/100 Dollars ($40,650,000.00),
payable in cash at closing (herein referred to as the "Purchase Price").
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2.1.1Purchase Price Allocation. Attached hereto as Schedule 2.1.1
is an allocation of the Purchase Price among the Assets. The
Purchase Price allocation set forth in Schedule 2.1.1 is
made with the knowledge and understanding that it will be
used by the parties for all purposes including tax,
reimbursement, and other purposes. Each party agrees that it
will report the transaction in accordance with such
allocation and that it will not take a position inconsistent
with such allocation except with the written consent of the
other party to this Agreement. Each party shall make
available to the other party all filings and reports
required under Section 1060 of the Code.
2.1.2Appraised Value of Assets. The Purchase Price is based on
appraisals for each of the Assets prepared in July of 1997,
by Senior Living Valuation Services, Inc. (the
"Appraisals"). A copy of each of the Appraisals were
delivered to Purchaser, which Appraisals and the value
reflected in each Appraisal by Facility are as follows:
Atrium at Carmichael: $ 8,700,000.00 Dated: July 24, 1997
Crosswoods Oaks: $ 5,400,000.00 Dated: July 24, 1997
Heatherwood: $ 8,600,000.00 Dated: July 18, 1997
Varenda Club $17,950,000.00 Dated: July 19, 1997
2.2 Assumed Liabilities. Purchaser will assume from Seller at Closing
only the obligations and liabilities of Seller related to (i) the ownership and
operation of the Facilities which accrue or otherwise are to be performed on or
after Closing in respect of the contracts and agreements listed in Schedule 2.2
attached hereto (collectively referred to herein as the "Assumed Contracts"), in
each case as in effect at Closing and solely to the extent that the existence at
or after Closing of such liabilities or obligations does not constitute a breach
of any representation or warranty made by Seller herein or in connection
herewith; (ii) proratable items which are not yet due and payable by Seller
prior to or at Closing and for which Purchaser receives a credit at Closing; and
(iii) obligations with respect to any security deposits or patient trust funds
held by Seller and transferred to Purchaser on the Closing Date. The liens and
other related security regarding the Pension Notes secured by the Facilities
(the "Mortgage") shall be released at Closing. Notwithstanding anything to the
contrary herein, or in any other writing delivered in connection herewith,
nothing herein or in any such other writing shall be construed to constitute the
assumption, express or implied, by Purchaser of any obligations or liability of
Seller or of any Affiliate thereof, except solely for the obligations and
liabilities expressly agreed to be assumed at Closing by Purchaser pursuant to
the first sentence of this Section 2.2. To the extent that any of the Assumed
Contracts are not assignable without the consent of a third party, this
Agreement shall not of itself constitute an assignment or an attempted
assignment of such Assumed Contracts if such assignment or attempted assignment
would constitute a breach thereof. Seller will use all reasonable efforts to
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obtain the consent to the assignment to Purchaser of each such Assumed Contract
with respect to which such consent is required for such assignment.
3. DEPOSIT. Upon entering into this Agreement, Purchaser shall escrow with
Lawyers Title Insurance Corporation, 600 North Pearl, Suite 700, Lock Box 185,
Dallas, Texas, 75201 ("Escrow Agent") the sum of Ten Thousand and 00/100 Dollars
($10,000.00), which sum (the "Deposit"), together with all interest earned
thereon, shall be held by Escrow Agent for Purchaser's benefit, and either
applied, returned or forfeited according to the terms of this Agreement.
4. TITLE REQUIREMENTS. Seller will deliver to Purchaser at Closing (without
exception) good and marketable title to all of the Assets (except those Assets
listed in Schedule 1.3 attached hereto, to which Assets Seller shall deliver a
good and marketable leasehold interest therein) subject to the following
requirements:
At Closing, Seller shall convey the Premises (including without
limitation the Facilities) to Purchaser by special warranty deed, subject to no
Liens or encumbrances whatsoever, other than (i) real estate taxes and
assessments which are a lien but not yet due and payable at Closing, (ii) zoning
and building code ordinances and regulations which are applicable to the
Premises and have not been violated, (iii) encumbrances which are shown on the
surveys of the Premises prepared and/or updated as provided by this Agreement
which are acceptable to Purchaser, (iv) rights of tenants of the Facilities on
the Closing Date, and (v) those exceptions to title referenced in the Title
Commitments, as hereinafter defined, which are accepted (or deemed accepted) by
Purchaser (all of the foregoing collectively referred to herein as the
"Permitted Exceptions"). At Closing, Seller shall convey to Purchaser the
furniture, fixtures, machinery, equipment and Inventory included in the Assets
by bill of sale with warranty of title and shall assign to Purchaser the leases
of the Assets described in Schedule 1.3., free and clear of the Mortgage.
If, on or before the Closing Date, Seller shall fail for any reason to
remove or discharge any Lien or encumbrance on any Facility other than those
Liens or encumbrances included in Permitted Exceptions, Purchaser may elect, in
its sole discretion, to terminate this Agreement.
5. TITLE POLICY AND SURVEY. Within thirty (30) days after the Effective Date,
Seller, at its expense, shall furnish Purchaser with a preliminary binder of
title insurance ("Title Commitments") from Lawyers Title Insurance Corporation
and/or its authorized agents (the "Title Company") agreeing to insure title to
each Facility in the name of Purchaser in the full amount of the Purchase Price
allocated to the Land and Facilities as set forth in Schedule 2.1.1. Such
preliminary title insurance binders shall be issued in the most recently
approved ALTA form without exception, other than Permitted Exceptions.
The acceptability of title to each of the Premises shall be determined
by Purchaser, in its discretion, within the later to occur of: (i) twenty (20)
days after receipt of both the Title Commitments and the Surveys, as hereinafter
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described, for the Premises, or (ii) the expiration of the Inspection Period. If
any exceptions other than Permitted Exceptions are not cured by Seller within
twenty (20) days after receipt of notice thereof from Purchaser, or thereafter
waived by Purchaser, Purchaser may terminate this Agreement. In the event
Purchaser does not elect to terminate this Agreement, Purchaser and Seller shall
proceed with Closing, and the cost of curing title shall be offset against the
Purchase Price. The Title Commitments shall be attached hereto as Schedule 5. At
Closing, the Title Company shall issue Owner's Policies of Title Insurance to
Purchaser insuring Purchaser's fees simple title to the each of the Premises
free and clear of all matters other than the Permitted Exceptions and deleting
all standard exceptions. In connection therewith, on or before Closing, Seller
agrees to execute and deliver to the Title Company all necessary certificates
and affidavits to delete standard exceptions.
Promptly after the Effective Date, Seller shall deliver to Purchaser
all survey, topographical and title information now in Seller's possession and
shall procure, at Seller's expense, within thirty (30) days after the Effective
Date, a current survey or recertification of the existing survey for each of the
Premises meeting the minimum standard and detail requirements for currently
approved ALTA Land Title Surveys and the requirements of the Title Company to
delete the standard "survey exceptions" (the "Surveys"), and be paid by Seller.
6. SELLER'S COVENANTS, REPRESENTATIONS, AND WARRANTIES. As an inducement to
Purchaser entering into this Agreement, Seller makes the following covenants,
representations and warranties, in addition to those contained elsewhere
elsewhere herein:
6.1 Corporate Matters.
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6.1.1 Organization, Power, and Standing. Seller is a limited
partnership duly organized, validly existing and in good standing under
the laws of the State of Delaware, and is qualified to do business in
each state in which it is now doing business, and has all requisite
partnership power and authority to execute, deliver, and perform this
Agreement, to carry on the business of the respective Facilities as now
conducted, to own, lease, or otherwise use its respective Assets, and
to consummate the transactions contemplated hereby.
6.1.2 Authorization and Enforceability. This Agreement has
been duly authorized, executed, and delivered by Seller, and, to the
best of Seller's knowledge, constitutes the legal, valid, and binding
obligation of Seller and is enforceable against Seller in accordance
with its terms, except to the extent such enforceability may be limited
by bankruptcy, reorganization, insolvency, or similar laws of general
applicability governing the enforcement of the rights of creditors or
by the general principles of equity (regardless of whether considered
in a proceeding at law or in equity).
6.1.3 Compliance with Charter Documents. The execution,
delivery, and performance of this Agreement by Seller and the
consummation by Seller of the transactions contemplated hereby will not
violate or conflict with or constitute a default under any term of the
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Limited Partnership Agreement of Seller. Attached hereto as Schedule
6.1.3 is a true and complete copy of the Limited Partnership Agreement
of Seller, and all amendments thereto, in effect as of the Effective
Date.
6.1.4 No Breach, Etc. The execution, delivery, and performance
of this Agreement by Seller will not conflict with or result in a
breach of or default by Seller under any term, condition, or provision
of any order, writ, injunction, decree, contract, agreement or
instrument to which Seller is a party or subject, or by which Seller or
the Assets are or may be bound; will not result in the creation or
imposition of any lien, charge, or encumbrance of any nature upon any
of the Assets; and will not give to others any interest or rights in,
or with respect to, any of the Assets.
6.2 Seller's Financial Statements. Attached as Schedule 6.2.1 are the
financial statements of Seller for the years ending December 31, 1995, December
31, 1996, and December 31, 1997, all of which have been audited by Ernst &
Young, LLP (the "Seller's Annual Financial Statements"). The Seller's Annual
Financial Statements (including the notes thereto) are, to the best of Seller's
knowledge, prepared in conformity with generally accepted accounting principles.
Seller has also provided Purchaser with Seller's financial statements through
April 30, 1998, and shall deliver to Purchaser, as promptly as possible
following the Effective Date, Seller's unaudited financial statements for the
period from January 1, 1998, to the end of the month immediately prior to the
Effective Date ("Seller's Interim Financial Statements").
6.3 Character of Operations, Compliance with Laws.
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6.3.1 Compliance Generally. To the best of Seller's knowledge,
neither the execution and delivery of this Agreement by Seller nor the
consummation by Seller of any transaction contemplated hereby does or
will violate or give rise to any violations or default under any Legal
Requirement assuming (i) Purchaser secures all necessary approvals from
federal, state, and local governmental and administrative agencies
having jurisdiction thereof required for the acquisition of the
Facilities by Purchaser, and (ii) Purchaser and Seller make any
applicable filing required under the Hart-Scott-Rodino Antitrust
Improvements Act, 15 USC ss. 18a and the regulations promulgated
thereunder. The Seller does not have actual knowledge that the
operation of the Facilities as heretofore or currently conducted was or
is in violation of, or that Seller is in default under any Legal
Requirement. Seller has not received any notice of any impending order
or requirement that would cause additional expenditures to be made to
bring the Premises and the Assets into compliance with Legal
Requirement. The sale of the Assets to Purchaser is not subject to any
bulk sales act.
6.3.2 No Bribes, Illegal Payments. Neither Seller, nor any
general partner of Seller, nor, to the best of Seller's knowledge, any
employee or agent of Seller, has directly or indirectly given or agreed
to give any gift, contribution, payment, or similar benefit to any
supplier, customer, governmental employee or other Person who was, is,
or may be in a position to help or hinder Seller or any Facility (i)
which could subject Seller or Purchaser to any damage or penalty in any
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damage or penalty in any civil, criminal or governmental litigation or
proceeding, or (ii) the non-continuation of which in the future could
reasonably be expected to result in a material adverse effect on the
business, operations, assets, prospects or condition, financial or
otherwise, of the Facilities.
6.3.3 Seller's Licenses. Schedule 6.3.3 attached hereto
contains a true and complete list of all currently effective licenses,
permits, approvals and qualifications issued to Seller by applicable
governmental agencies (whether federal, state, local or other) in
connection with the ownership of the Assets and the operation of the
Facilities (collectively, "Seller's Licenses"). Seller's Licenses are
all of the licenses, permits, approvals, and qualifications necessary
for the ownership and operation by Seller of the Assets including,
without limitation, each of the Facilities. Seller's Licenses are in
full force and effect and no such License is conditional or restricted.
6.3.4 Compliance of Facilities with State Licensure, Medicare
and Medicaid Certification Requirements. Each Facility currently meets
and, as of the Closing Date, shall meet, in all respects, all standards
and conditions for the operation and licensure of such Facility,
including those for skilled and intermediate care nursing facilities to
the extent such standards and conditions are applicable to such
Facility and, if eligible, for participation in the Medicare and
Medicaid programs under federal, state, and local governmental laws,
rules, regulations, guidelines, standards, and conditions, and is not
subject to any variances or waivers with respect to licensure or
operational requirements.
6.3.5 Returns, Reports, Etc. All cost reports and all sales
and use tax returns necessary to be filed by Seller with any
governmental authorities on or prior to the Effective Date, including
those to be filed on or prior to the Closing Date, have been, or will
be, accurately completed in all material respects and properly and
timely filed with the appropriate taxing authority. Seller has no
obligations to the States in which the Facilities are located for
reimbursement of Medicaid depreciation recapture liabilities or to the
United States Government for Medicare overpayment liabilities.
6.3.6 Work Order, Statements of Deficiencies. There are no
pending work orders or statements of deficiencies relating to the
Premises or any Facility which have been required or issued by any
state department of health or Medicare or Medicaid certification
agency, or any insurance company, police or fire department,
sanitation, health or work authorities or any other federal, state, or
municipal authority. Seller shall provide to Purchaser a copy of any
such work order or statement of deficiencies received by Seller after
the Effective Date within five (5) days after receipt thereof.
6.3.7 Environmental Matters. Seller is not subject to any type
of enforcement actions or compliance order for any violation or alleged
violation of any environmental laws, rules, standards, or regulations
relating to the Premises or any Facility, including, but not limited
to, those related to waste-management, air pollution control,
waste-water treatment or noise abatement. Seller has not received any
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notice or citation for noncompliance by it with respect to any of the
foregoing relating to the Premises or any Facility. To the best of
Seller's knowledge:
(i) Seller has not been notified that any person's
health has or may have been impaired (including any past or
present employee) as the result of the use, existence, or
disposal of Hazardous Materials or Infectious Wastes on the
Premises.
(ii) All Infectious Wastes have been stored,
transported, and disposed of in accordance with all laws and
licensure and certification standards applicable to Seller and
the respective Facilities.
(iii) There are no underground fuel storage tanks
located at the Premises except as indicated in the Existing
Site Assessments.
(iv) The Premises are not contaminated with any
Hazardous Materials or Infectious Waste and neither Seller nor
any of Seller's employees, agents, licensees, or invitees have
placed or permitted the placement of any Hazardous Materials
or Infectious Waste in, on, or over the Premises; the Premises
do not appear on any state or Federal Comprehensive
Environmental Responsibility, Compensation and Liability Act,
or Super Fund lists as being classified as a hazardous waste
site; and the Premises have not been used as a plant or site
where Hazardous Materials or Infectious Waste was subjected to
treatment, storage, disposal, or recovery.
6.3.8 Litigation. Except as set forth on Schedule 6.3.8
attached hereto, there is no litigation, at law or in equity, or any
proceeding before or investigation by any federal, state, or municipal
court, board, or other governmental or administrative agency or any
arbitrator, against Seller in connection with the operation of the
Facilities or otherwise affecting the Assets, or questioning or
challenging the validity of this Agreement or actions to be taken
hereunder, pending or, to the best of Seller's knowledge, threatened,
involving a claim of $10,000 or more ($40,000 in the aggregate), nor
has Seller given notice to any insurers (for notice or adjustment
purposes) of any claim against Seller. No credit will be given Seller
at Closing for any litigation claims pending or threatened. No
judgment, decree, or order of any federal, state, or municipal court,
board, or other governmental or administrative agency or any arbitrator
(i) has been issued, to the best of Seller's knowledge, against any
Person other than Seller which could have any material adverse effect
on the business, operations, assets, prospects or condition, financial
or otherwise, of Seller or the operation of any Facility, or (ii) has
been issued against Seller.
6.4 Assets and Liabilities.
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6.4.1 Condition of Certain Assets. To the best knowledge of
Seller, all machinery and equipment included in the Assets, including
without limitation, all heating, air conditioning, electrical and life
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safety equipment/systems installed on the Premises, are in good working
order, ordinary wear and tear excepted, and the roofs of each Facility
are in good repair, ordinary wear and tear excepted.
6.4.2 Warranties and Guarantees. To the best knowledge of
Seller, Schedule 6.4.2 attached hereto contains a true and complete
list of all written warranties and guarantees currently in effect in
connection with the buildings and other improvements on the Premises
including by way of illustration, and not by way of limitation, any
warranties on the roofs of the buildings and any warranties and
guarantees in connection with any heating, air conditioning, or other
equipment in, or about said buildings or improvements and any rights
Seller may have against their general contractors or their
subcontractors (collectively, the "Warranties and Guarantees"). Seller
shall assign the Warranties and Guaranties to Purchaser, at Closing, to
the extent such Warranties and Guaranties are transferable or
assignable and Seller shall assist Purchaser in enforcing such
Warranties and Guarantees.
6.4.3 Inventory. All items of Inventory included in the Assets
consist and will consist of, as of Closing, items of a quality
customarily used by Seller in the ordinary course of the business of
its Facilities.
6.4.4 Trade Names. Seller has the right to use the respective
names of its Facilities as set forth in Schedule B attached hereto in
the market area of the respective Facilities, and Seller has not
licensed or entered into any agreement to permit any person or entity
to use such Facility name or any variation thereof. To Seller's
knowledge, the use of such Facility names by Seller does not, and the
use of such Facility names by Purchaser in the respective market areas
of each Facility in a manner consistent with Seller's past practices
will not, as of the Closing Date, conflict with any rights to any
similar name owned by any other person or entity known to Seller.
6.4.5 Liabilities. Except as set forth in the Schedules
attached hereto, to the best knowledge of Seller, there are no
liabilities of Seller affecting the Assets, whether absolute,
contingent, or fixed, liquidated or unliquidated, matured or not yet
due, of any nature, including tax liabilities, other than (i)
liabilities expressly accounted for and disclosed in Seller's Annual
Financial Statements or Seller's Interim Financial Statements, or (ii)
liquidated, non-contingent liabilities incurred by Seller in the
ordinary course of business since December 31, 1997.
6.4.6 Liens and Encumbrances. As of the Effective Date, to the
best knowledge of Seller, the Assets are not subject to any Liens or
encumbrances other than those Liens and encumbrances included in the
Permitted Exceptions, the personal property Permitted Exceptions and
such other Liens or encumbrances which shall be paid and released at
Closing. After giving effect to the transfer to Purchaser at Closing,
the Assets will not be subject to any Lien except (i) any Lien included
in the Permitted Exceptions and the personal property Permitted
Exceptions (ii) any Lien created by Purchaser, if any, and (iii) any
Lien insured against by title insurance. If, subsequent to the Closing,
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any mechanic's or other lien, charge or order for the payment of money
shall be filed against the Assets or against Purchaser or its assigns,
based upon any act or omission of Seller, its agents, servants, or
employees, or any contractor or subcontractor connected with
construction on the Premises prior to Closing (whether or not such
lien, charge, or order shall be valid or enforceable as such), within
thirty (30) days after notice to Seller of the filing thereof, Seller
shall take such action, by bonding, deposit, payment or otherwise, as
will remove and satisfy such lien of record as against the Assets.
6.4.7 Taxes. To the best knowledge of Seller, all taxes,
excises and assessments against the Assets due and payable on or before
the Effective Date have been paid. As of Closing, there will be no
unpaid or outstanding taxes or assessments against the Assets or any
part thereof (except only taxes and assessments not yet due and payable
to be adjusted as of the Closing Date). To the best knowledge of
Seller, there are no agreements, waivers or other arrangements
providing for an extension of time with respect to the assessment of
any type of tax or deficiency against Seller with respect to the Assets
owned by Seller, nor are there any actions, suits, proceedings,
investigations, or claims for additional taxes and assessments asserted
by any taxing authority with respect to the Assets owned by Seller of
which Seller has notice.
6.4.8 Certain Real Estate Matters. There are no pending real
estate tax abatement actions or proceedings, there is no unrepaired
casualty damage to the Premises and there are no pending or, to the
best of Seller's knowledge, threatened eminent domain or condemnation
proceedings, with respect to the Premises. The Premises are each
located on separate and independent tax parcels.
6.4.9 Trade Payables. Except as specifically provided
otherwise in this Agreement, Seller shall pay all of its trade payables
when and as due before and after the Closing.
6.4.10 Tenant and Patient Accounts. Except as set forth in
Schedule 6.4.10 attached hereto, as of the Effective Date, no tenants
or patients at any Facility (nor third party payors responsible for
such patients) are delinquent in the payment of their bills owed to
Seller. At Closing, Seller shall provide Purchaser with a update to
Schedule 6.4.10 certified as of the Closing Date.
6.5 Contractual Matters.
6.5.1 Contracts. Schedule 6.5.1.1 attached hereto contains a
true and complete list of all material written contracts, agreements,
and leases (other than (i) material agreements described in Section
6.6.1 hereto (the "Labor Contracts"); and (ii) occupancy agreements of
each Facility (the "Occupancy Agreements")), between Seller and any
other person or entity currently in effect in connection with the
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Premises or the operation of the Facilities (together with the Labor
Contracts and Occupancy Agreements, collectively referred to herein as
the "Contracts"). Seller has heretofore delivered to Purchaser a true
and complete copy of each such Contract listed in Schedule 6.5.1.1.
Each Assumed Contract is in full force and effect, and, to the best of
Seller's knowledge, neither Seller nor any other party to any Assumed
Contract is in default of its respective obligations thereunder, and to
the best of Seller's knowledge, no event exists which, with notice or
passage of time, would become an event of default by Seller thereunder.
6.5.2 Transactions with Affiliates. Except as set forth in
Schedule 6.5.2 attached hereto, no Affiliate of Seller is an officer,
director, employee, consultant, competitor, customer, or supplier of,
or is a party to any Contract with, Seller in connection with any of
the Facilities (collectively, "Affiliate Arrangements"). Unless
Purchaser otherwise agrees in writing, Seller shall terminate or cause
to be terminated each such Affiliate Arrangement described in Schedule
6.5.2 hereto on or before the Closing Date. There are no trade names,
proprietary knowledge or licenses that any such Affiliate owns or is
licensed or otherwise has the right to use and which is necessary to
the operation of any Facility.
6.5.3 Occupancy Agreements. Attached as Schedule 6.5.3.1
hereto are true and complete copies of the current standard forms of
occupancy agreements entered into between Seller and tenants or
patients at each Facility (the "Occupancy Agreement Forms"). There are
no agreements under which tenants or patients entering any Facility
subsequent to the adoption by Seller of the applicable Occupancy
Agreement Form currently occupy all or any part of any Facility which
materially deviate from the Occupancy Agreement Forms. There are no
undisclosed amendments or agreements to such residency agreements, nor
any special rates, services, or concessions promised by Seller to any
residents of any Facility except as disclosed in Schedule 6.5.3.2
attached hereto.
6.5.4 Insurance. Attached as Schedule 6.5.4 hereto is a list
of all insurance coverage maintained by Seller as of the Effective Date
in connection with the Premises and the operation of each Facility. All
such insurance coverage is in full force and effect (with no overdue
premium) in the amounts set forth on Schedule 6.5.4. Seller agrees to
maintain the insurance coverage listed in Schedule 6.5.4 without
material change thereto through the Closing Date. Certificates
evidencing such insurance coverage will be supplied by Seller to
Purchaser at Purchaser's request. Seller shall promptly inform
Purchaser of any non-renewal, material change, cancellation, or
replacement of any such insurance coverage prior to Closing. In the
event of any non-renewal, material change, or cancellation of the
insurance coverage currently maintained by Seller hereunder, Purchaser
shall have the right during the period prior to Closing to provide
replacement insurance generally comparable to the insurance coverage
currently maintained by Seller, at the Seller's expense, and to deduct
the cost thereof from the Purchase Price. All prepaid insurance
policies shall be assigned to Purchaser at Closing.
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6.6 Labor Matters.
6.6.1 Employment Related Contracts. Seller has provided to
Purchaser all written employment agreements relating to any employees
of Seller and all written compensation, pension, retirement, welfare,
profit sharing, incentive, or other similar written plans relating to
any employee of Seller. Seller has also advised Purchaser of all plans,
agreements, arrangements, or practices which constitute "fringe
benefits" to any of the employees of Seller, including, without
limitation, group medical insurance, group life insurance, disability
insurance, and related benefits. A complete list of all of the
foregoing is attached hereto as Schedule 6.6.1.
6.6.2 Employee Compensation and Benefits. To the best
knowledge of Seller, attached hereto as Schedule 6.6.2 is a true and
complete list of all current employees of Seller, and their current
level of compensation, which list shall be true and correct as of the
Closing Date in all material respects except for those changes
specifically authorized by Section 8.1 hereof and except for the
addition or removal of employees in the ordinary course.
6.6.3 Labor Relations. To the best of Seller's knowledge, no
employee of Seller is currently part of any collective bargaining unit
or represented by any collective bargaining representative, and no
petition has been filed or proceeding instituted by any such employee
or group of employees with any labor relations board seeking
recognition of a bargaining representative. There are no strikes,
grievances, disputes, or controversies with individual employees,
except for disputes and controversies with individual employees arising
in the ordinary course of business consistent with past experience
which do not and will not, individually or in the aggregate, have an
adverse effect on the business, operations, assets, prospects, or
conditions, financial or otherwise, of Seller, Purchaser, or the
operation of the Facilities.
6.7 Other Representations.
6.7.1 Completeness and Accuracy of Contracts and Documents. To
the best of Seller's knowledge, all copies of contracts and documents
delivered by Seller to Purchaser in connection with the transactions
contemplated hereby are complete and accurate in all respects, and no
such contract or agreement has been amended or modified in any respect.
6.7.2 No Misrepresentations. To the best of Seller's
knowledge, Seller has not made an untrue statement of material fact in
any instrument, certification, or statement furnished to Purchaser, nor
has Seller omitted to state a material fact necessary to make the
statements contained herein or therein not misleading.
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6.8 Seller's Covenants Regarding Transfer of Ownership Approvals and
Notice. Seller shall file all notices and other documents with applicable
federal, state, and local governmental authorities as required under law to
effect the transfer of ownership of the Facilities to Purchaser and, to the
extent applicable, the assignment to Purchaser of each currently effective
Medicare and Medicaid provider agreement and Seller's Licenses, including
without limitation, at least thirty (30) days prior to the Closing Date, file
with the Federal Trade Commission, to the extent required under the
Hart-Scott-Rodino Antitrust Improvements Act, 15 USC ss. 18a and the regulations
promulgated thereunder, a "Notification and Report Form for Certain Mergers and
Acquisitions." Seller shall assist and cooperate with Purchaser with all such
filings and other action required to be taken by Purchaser to accomplish the
foregoing.
6.9 Finder's or Broker's Fee. Except for a three percent (3%) broker's
fee payable to Capital Realty Group Brokerage, Inc., by Seller, Seller has not
engaged in any conduct that has given or will give rise to any liability for any
fee, compensation, or reimbursement for expenses to any agent, finder, or
broker, either in the nature of a finder's fee or otherwise, in connection with
the transactions contemplated hereby.
6.10 Seller's Knowledge Defined. The representations and warranties
made to Purchaser by Seller in this Section 6 and elsewhere in this Agreement
are limited to the current actual knowledge of the executive officers of the
corporation which is the sole general partner of the Seller, and the
recertification required of Seller at Closing shall likewise be qualified to the
then current actual knowledge of said officers.
7. PURCHASER'S COVENANTS, REPRESENTATIONS, AND WARRANTIES. As an
inducement to Seller entering into this Agreement, Purchaser makes only the
following Covenants, representations, and warranties:
7.1 Organization, Power, and Standing. Purchaser is a corporation duly
organized and validly existing under the laws of the State of Texas, and has all
requisite power to execute, deliver, and perform this Agreement and to
consummate the transactions contemplated hereby.
7.2 Authorization and Enforceability. This Agreement has been duly
authorized, executed, and delivered by Purchaser, and, to the best of
Purchaser's knowledge, constitutes the legal, valid, and binding obligation of
Purchaser, and is enforceable against Purchaser in accordance with its terms,
except to the extent such enforceability may be limited by bankruptcy,
reorganization, insolvency, or similar laws of general applicability governing
the enforcement of the rights of creditors or by the general principles of
equity (regardless of whether considered in a proceeding at law or in equity).
7.3 Compliance with Charter Documents. The execution, delivery, and
performance of this Agreement by Purchaser and the consummation by Purchaser of
the transactions contemplated hereby will not violate or conflict with or
constitute a default under any term of the Charter or Bylaws of Purchaser.
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7.4 No Breach, Etc. The execution, delivery, and performance of this
Agreement will not conflict with or result in a breach of or default by
Purchaser under any material terms, condition, or provision of any order, writ,
injunction, decree, contract, agreement, or instrument to which Purchaser is a
party or subject or by which it is bound.
7.5 Litigation. There is no litigation, at law or in equity, or any
proceeding before or investigation by any federal, state, or municipal court,
board of arbitrator, against Purchaser, pending or, to the best of Purchaser's
knowledge, threatened, which, if adversely determined, would have a material
effect on Purchaser.
7.6 Covenants Regarding Transfer of Ownership Approvals and Notices. To
the extent applicable, Purchaser shall file all applications and other documents
with applicable federal, state, and local governmental authorities as required
under law to effect the transfer of ownership of the Assets to Purchaser and the
assignment to Purchaser of each of Seller's Licenses. In addition, Purchaser, at
least thirty (30) days prior to the Closing Date, shall file with the Federal
Trade Commission, to the extent required under the Hart-Scott-Rodino Antitrust
Improvements Act, 15 USC ss. 18a and the regulations promulgated thereunder, a
"Notification and Report Form for Certain Mergers and Acquisitions."
7.7 Finder's or Broker's Fee. Purchaser has not engaged in any conduct
that has given or will give rise to any liability for any fee, compensation, or
reimbursement of expenses to any agent, finder, or broker, either in the nature
of a finder's fee or otherwise, in connection with the transactions contemplated
hereby.
7.8 Purchaser's Knowledge Defined. The representations and warranties
made to Seller by Purchaser in this Section 7 and elsewhere in this Agreement
are limited to the current actual knowledge of the executive officers of
Purchaser, and the recertification required of Purchaser at Closing shall
likewise be qualified to the then current actual knowledge of said officers.
8. CERTAIN AGREEMENTS OF THE PARTIES.
8.1 Conduct of Seller Prior to Closing. Seller covenants and agrees
that, through the period prior to Closing: (i) the Assets, including without
limitation each Facility, shall be operated in the ordinary course of business
and in a manner consistent with Seller's past practice, and Seller will use its
best efforts to maintain existing levels of occupancy at each Facility; (ii) no
sale, disposition, removal, or encumbrance of any furniture, fixtures, or
equipment located at the Premises, outside of the ordinary course of business,
shall be made without the written approval of Purchaser; (iii) except in
accordance with established practice and rates of increase, Seller shall not pay
or obligate itself to pay any bonus, pension, retirement, insurance, death, or
other form of incentive or special compensation to any employee, agent, partner,
or shareholder, or make any increase in rates of pay of any employees, agents,
partners, or shareholders without the written approval of Purchaser; (iv) except
for closing expenses contemplated by this Agreement as Seller's obligation at
Closing, no contract, agreement, lease, or other obligation providing for the
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payment of consideration or the occurrence of indebtedness of more than Five
Thousand Dollars ($5,000) in any one instance, Ten Thousand Dollars ($10,000) in
the aggregate, shall be executed, entered into, or made by Seller in connection
with the operation of the Assets, without the written approval of Purchaser; (v)
no increase shall be made in the usual rates charged to tenants or patients at
the Facility without the written approval of Purchaser; (vi) Seller will replace
the Inventory used in the operation of the Facility as and when required in the
ordinary course of business and the quantity and quality of the Inventory at
Closing shall be substantially the same as exists on the Effective Date; (vii)
no order for equipment, machinery, furniture, furnishings, or accessories which
was placed by Seller prior to the Effective Date shall be canceled by Seller
after the Effective Date without the written approval of Purchaser; (viii) as
soon as possible, but not less than twenty-four (24) hours, prior to the
submission of any plan of correction to any state licensure authorities, Seller
shall submit a copy thereof to Purchaser; (ix) Seller shall use its best efforts
to preserve the business operation of each Facility and to preserve for
Purchaser the good will of Seller's suppliers, the patients and tenants in each
Facility, and others having business relations with each Facility; (x) except as
otherwise directed by Purchaser, Seller shall use its best efforts to retain the
services of each Facility's current management-level and professional employees
and to maintain existing staffing patterns; and (xi) Seller shall not pay any
sums to any partner of Seller or any Affiliate of Seller except in the ordinary
and necessary course of the operations of the Facilities, provided, however,
that such payments are comparable to that which would be charged and received by
a non-affiliated business for the same or similar goods or services.
8.2 Preparation for Closing. Each party hereto shall use its best
efforts to assist the other to apply for and obtain any such permits, licenses,
authorization, and approvals required by the other party under applicable
federal, state, and local law in order to sell/purchase the Assets and operate
the Facilities as contemplated hereby, and complete this transaction. Seller and
Purchaser shall use their best efforts to bring about the fulfillment of each of
the conditions precedent to the obligations of the other party set forth in this
Agreement.
8.3 Prohibited Act. Seller will not merge or consolidate with or into
any other corporation, partnership or trust, sell, lease, or otherwise dispose
of any of the assets (except in accordance with Section 8.1 hereof), sell any
additional partnership interests, liquidate, or dissolve, nor agree to do any of
the foregoing.
8.4 Access to Premises and Information. On and prior to the Closing Date,
Seller shall permit Purchaser and the Purchaser's counsel, accountants,
engineers, consultants, and other authorized representatives thereof to have
full and complete access to the Premises and its documents, books and records to
the extent the same are related to the transactions contemplated hereunder and
to make copies during normal business hours of such financial and operating data
and other information with respect to respective businesses and properties as
Purchaser or any of its authorized representations shall reasonably request to
the extent such data and information are related to the transactions
contemplated hereunder. Seller shall deliver such additional information and
copies of documents, books, and records relating to the businesses and
properties of Seller as may reasonably requested by Purchaser or any of its
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authorized representations. Except as expressly provided otherwise in this
Agreement, any investigation undertaken by Purchaser hereunder shall not
diminish Purchaser's right to rely on Seller's representations and warranties.
8.5 Environmental Testing. Seller shall provide Purchaser copies of
each of the Phase I Site Assessments prepared for the Facilities by EMG (the
"Existing Site Assessments"), each of which are dated August 22, 1997. Purchaser
may, at its option and expense, have the Existing Site Assessments addressed and
certified to Purchaser, in which event Seller agrees to cooperate with Purchaser
in obtaining such recertifications. In the event Purchaser desires further
testing, Seller hereby grants to Purchaser and its agents the right to enter
upon the Premises at any reasonable time or times after the Effective Date to
conduct, at Purchaser's sole cost and expense, such further inspections,
investigations, and tests as are necessary to complete Purchaser's own
Preliminary Environmental Site Assessment ("PESA") at each Facility. If any such
PESA shall indicate that any Hazardous Material may be located at the Premises,
Seller hereby grants to Purchaser and its agents the right to conduct such
additional inspections, investigations and tests of the Premises, including,
without limitation, test borings, to determine whether, in fact, any Hazardous
Material is located at the Premises. In connection with the conduct of such
PESA's and any further testing warranted thereby (collectively, the
"Environmental Testing"), Purchaser agrees, at Purchaser's sole cost and
expense, to repair any damage to the Premises resulting from such Environmental
Testing. Purchaser shall hold confidential the information in the Existing Site
Assessments and results of the Environmental Testing in the event Purchaser does
not close the transaction contemplated by this Agreement; provided, however,
that in the event any Hazardous Material is discovered at the Premises and
Purchaser is required by law to disclose such finding to governmental
authorities, Purchaser shall have the right to disclose such finding to such
authorities without liability to Purchaser; provided, further, that Purchaser
shall disclose such findings to Seller prior to disclosure of such findings to
any governmental authorities.
8.6 Expenses of Transaction. Seller and Purchaser each agree to be
responsible for all fees of their respective attorneys for services rendered in
connection with this transaction and the same shall be paid outside of Closing.
Seller shall pay for all transfer taxes, revenue, excise, and surtax charges,
survey costs, conveyance, and recording fees, title examination costs and
owner's title insurance policy premiums in connection with the transactions
contemplated by this Agreement, provided however, that any endorsements to the
title insurance policy provided by Seller or additional coverage beyond the
Purchase Price shall be at the cost and sole expense of Purchaser. The filing
costs for any Hart-Scott-Rodino determination shall be shared equally by
Purchaser and Seller.
8.7 Further Assurances. Each of the parties hereto, both before and
after the Closing, upon the request from time to time of any other party hereto
and without further consideration, will do each and every act and thing as may
be necessary or reasonably requested to consummate the transactions contemplated
hereby and to effect an orderly transfer to Purchaser of the Assets and
assumption by Purchaser of the Assumed Contracts and the other assumed
liabilities under Section 2.2 hereof, including without limitation executing,
acknowledging, and delivering assurances, assignments, powers of attorney, and
other documents and instruments; furnishing information and copies of documents,
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books, and records (including, without limitation, tax records); filing reports,
returns, applications, filings, and other documents and instruments with
governmental authorities; and cooperating with the other party hereto in
exercising any right or pursuing any claim, whether by litigation or otherwise,
other than rights and claims running against the party from whom or which such
cooperation is requested.
8.8 Use of Certain Brochures and Other Materials. After the Closing
Date, Purchaser shall be entitled to use any existing brochures and other
printed materials used in connection with the marketing and operation of the
Facilities.
8.9 Appraisals. Purchaser acknowledges that Seller has provided
Purchaser copies of the Appraisals as described in Section 2.1.2 herein.
Purchaser further acknowledges and agrees that it accepts the Appraisals and the
values provided therein for purposes of this Agreement and for the establishment
of the Purchase Price. Notwithstanding the foregoing, Purchaser may, at its
option and expense, have the Appraisals updated and certified to Purchaser or
obtain additional appraisals of the Assets. In the event that Seller desires to
update the Appraisals or obtain new appraisals, Seller hereby grants to
Purchaser and its agents the right to enter upon the Premises at any reasonable
time or times to conduct and obtain such further appraisals and/or updates.
Seller agrees to cooperate with Purchaser in obtaining any such recertification.
8.10 Bankruptcy. If, prior to Closing, Seller or Purchaser shall file a
voluntary petition in bankruptcy or shall be adjudicated as bankrupt or
insolvent, or shall file any petition or answer so seeking or acquiescing in any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution, or similar relief for itself under any present or future federal,
state, or other statute, law, or regulation relating to bankruptcy, insolvency,
or other relief for debtors; or shall seek or consent to or acquiesce in the
appointment of any trustee, receiver, or liquidator of Seller or Purchaser or of
all or any part of the Assets, or of any or all of the royalties, revenues,
rents, issues, or profits thereof, or shall make any general assignment for the
benefit of creditors, or shall admit in writing its inability to pay its debts
generally as they become due ("Bankrupt"), then the non-Bankrupt party may
terminate this Agreement. If Purchaser consents in writing to any of the
foregoing actions taken by or against Seller, then Purchaser shall waive the
right to terminate the Agreement on account of this Section 8.10.
9. INSPECTION PERIOD AND CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE.
Purchaser's obligation to purchase the Assets shall be subject to the following:
9.1 Purchaser's Inspection Period. Subject to Section 9.2 below and
except has may be expressly provided to the contrary herein, Purchaser shall
have until July 24, 1998 (the "Inspection Period"), in which to conduct its due
diligence review and make its investigations and studies with respect to the
Assets as Purchaser deems appropriate, including, but not limited to,
Purchaser's review of the Seller's financial information, tenant and patient
information, Title Commitments, Surveys and environmental condition of the
Facilities, and to terminate this Agreement, by written notice to Seller, to be
received on or before the expiration of the Inspection Period, if Purchaser is
not, for any reason, satisfied with the Assets. If Purchaser fails to give
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notice of such termination to be received by Seller on or before the expiration
of the Inspection Period, then Purchaser's rights under this Section 9.1 shall
be deemed to have been waived by Purchaser and this Agreement shall remain in
full force and effect without any longer being subject to this Section 9.1. If
Purchaser does give notice of termination, $100.00 of the Earnest Money shall be
paid to Seller solely for the rights granted Purchaser hereunder and the balance
of the Earnest Money shall be refunded to Purchaser by Title Company, and the
parties shall have no further rights or obligations hereunder, except for those
which expressly survive any such termination. Promptly after such termination
Purchaser shall provide to Seller, without charge, copies of any reports,
surveys, drawings or tests obtained by Purchaser with respect to the Assets.
9.2 Conditions to Purchaser's Obligation to Close. Notwithstanding
anything to the contrary contained in Section 9.1, the obligations of Purchaser
at Closing to purchase the Assets and to assume the Assumed Contracts and the
other assumed liabilities under Section 2.2 hereof are subject to the
satisfaction, at or prior to Closing, of all of the following conditions,
compliance with which, or the occurrence of which, may be waived in whole or in
part by Purchaser:
9.2.1 Continued Accuracy of All Representations and
Warranties. All representations and warranties of Seller contained in
this Agreement shall be true and correct in all respects as of Closing
with the same force and effect as if made at and as of Closing.
9.2.2 Performance of Agreements. Seller shall have performed
and satisfied all covenants, agreements, and conditions required by
this Agreement to be performed or satisfied by it at or prior to
Closing.
9.2.3 Closing Certificate. At Closing, Seller shall furnish to
Purchaser a certificate signed by the general partner of Seller dated
the Closing Date, to the effect that the conditions specified in
Sections 9.2.1 and 9.2.2 hereof have been satisfied.
9.2.4 Licenses and Approvals. On or before Closing, Purchaser
shall have secured all approvals available to it prior to Closing from
the appropriate federal, state, and local governmental or
administrative agencies having jurisdiction thereof required to
conclude the proposed transfer of the Assets to Purchaser pursuant to
the terms of this Agreement, and providing, to the extent applicable,
for the continued operation by Purchaser of the Facilities on
substantially the same basis as Seller is currently operating the same.
9.2.5 Legality; Material Adverse Change; No Change in Law.
Purchaser's purchase of and payment for the Assets and assumption of
the Assumed Contracts and other assumed liabilities under Section 2.2
shall not be prohibited by any Legal Requirement. No Legal Requirement
shall have been enacted, nor shall any legislation have been introduced
in either house of the United States Congress or of the legislature of
those states in which the Facilities are located, or favorably reported
for passage to either house of the United States Congress or of the
legislature of such states or by any committee thereof, nor shall have
any investigation by any governmental authority or administrative
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agency been commenced, nor shall any decision of any court of competent
jurisdiction have been rendered, nor shall any order by any
governmental authority or administrative agency been issued, nor shall
have occurred at any Facility, which materially and adversely affects,
restrains, prevents, or changes the transactions contemplated by this
Agreement, or has a material adverse effect on the business,
operations, assets, prospects, or condition, financial or otherwise, of
any Facility or of Seller.
9.2.6 Litigation. No action or proceeding shall have been
instituted at or prior to Closing before any court, arbitrator or other
governmental body, or instituted or threatened by any public authority,
pertaining to any Facility or the transfer of the Assets and the
assumption of the Assumed Contracts and the other assumed liabilities
under Section 2.2 hereof by Purchaser or any of the other transactions
contemplated hereby, the results of which action or proceeding could
prevent or make illegal the consummation of such transactions, or which
could otherwise have a material adverse effect on the business,
operations, assets, prospects, or condition, financial or otherwise, of
any Facility or of Seller.
9.2.7 Opinion of Seller's Counsel. Purchaser shall have
received an opinion of Seller's independent legal counsel, dated as of
the Closing Date, addressed to Purchaser, in form and substance
reasonably satisfactory to Purchaser, to the effect that:
(i) Seller is a limited partnership which is duly
organized and validly existing under the laws of the State of
Delaware and has all the requisite partnership power to own
all of its assets and properties and to carry on the business
of each Facility owned by Seller as presently conducted.
(ii) The execution, delivery, and performance by
Seller of this Agreement and each of the documents
transferring or assigning title to the Assets to be delivered
by Seller to Purchaser at Closing have been duly authorized by
all requisite corporate or partnership action of Seller. This
Agreement and each of the documents transferring or assigning
title to the Assets to be delivered by Seller to Purchaser at
Closing constitute the valid and binding obligation of Seller
enforceable in accordance with its terms, except as
enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or other similar laws
in effect from time to time affecting the rights of creditors
generally and by the application of equitable principles.
(iii) The execution, delivery, and performance by
Seller of this Agreement and the documents transferring or
assigning title of the Assets to be delivered by Seller to
Purchaser at Closing will not (i) violate any provision of the
Limited Partnership Agreement of Seller or Trust Indenture,
(ii) conflict with or result in any breach of or default under
any order, writ, injunction, decree, agreement, or instrument
of which counsel has knowledge by which any of the Assets are
bound, (iii) to counsel's knowledge, result in the creation or
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imposition of any lien, charge, or encumbrance of any nature
upon any of the Assets, (iv) give to others of whom counsel
has knowledge any property, contractual or security interest
or rights in, or with respect to any of the Assets, and, (v)
give others any right to terminate any agreement to which
Seller is a party or by which the Assets are benefited, of
which counsel has knowledge.
Counsel may specify the state or states in which they are admitted to
practice, and may assume that the governing law that applies to any agreement is
the same as the law of the State of Indiana.
9.2.8 Presence of Hazardous Material at the Premises. The
Environmental Testing, if undertaken by Purchaser, shall not have
revealed the presence of a material amount of any Hazardous Material at
the Premises. For purposes of this Section 9.2.8, the amount of any
Hazardous Material present at the Premises shall be deemed material if
the reasonable estimated cost of removal and disposal thereof, in
accordance with all applicable laws and statutes, as determined by a
qualified environmental consultant reasonably acceptable to Purchaser,
exceeds Twenty Thousand Dollars ($20,000) in the aggregate for all
Facilities.
9.2.9 Schedules. As of the Effective Date, the Schedules to be
attached to and made a part of this Agreement have not been prepared by
Seller or reviewed by Purchaser. Seller shall furnish all Schedules at
least ten (10) days prior to the expiration of the Inspection Period.
If Purchaser is not satisfied with any Schedule and if Seller is not
willing to amend the Schedules to satisfy Purchaser, then Purchaser may
terminate this Agreement, and the parties shall have no further rights
or obligations except for those which expressly survive any such
termination.
9.2.10 Title Policies. Pursuant to the Title Commitments the
Title Company will have delivered to Purchaser as of the Closing Date
title policies in favor of Purchaser, as owner of the Premises,
insuring Purchaser's fee simple title to the Premises free and clear of
all matters other than the Permitted Exceptions and deleting the
standard exceptions.
10. CONDITIONS TO SELLER'S OBLIGATION TO CLOSE. The obligations of Seller at
Closing to sell the Assets and to assign the Assumed Contracts and the other
liabilities to be assumed by Purchaser pursuant to Section 2.2 hereof are
subject to the satisfaction at or prior to Closing, of all of the following
conditions, compliance with which, or the occurrence of which, may be waived in
whole or in part by Seller:
10.1 Representations, Warranties, and Covenants.
------------------------------------------
10.1.1 Continued Accuracy of Representations and Warranties.
All representations and warranties of Purchaser contained in Section 7
of this Agreement shall be true and correct in all material respects as
of the Closing with the same force and effect as if made at and as of
the Closing.
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10.1.2 Closing Certificate. At Closing, Purchaser shall
furnish to Seller a certificate signed by a duly authorized corporate
officer of Purchaser dated the Closing Date, to the effect that the
conditions specified in Section 10. 1. 1 hereof has been satisfied.
10.2 Litigation. No action or proceeding shall have been instituted at
or prior to Closing before any court, arbitrator or other governmental body, or
instituted or threatened by any public authority, pertaining to the transfer of
the Assets and the assumption by Purchaser of the Assumed Contracts and other
liabilities to be assumed by Purchaser pursuant to Section 2.2 hereof or any of
the other transactions contemplated hereby, the results of which action or
proceeding would prohibit or make illegal the consummation of such transactions.
10.3 Licenses and Approvals. On or before Closing, Seller shall have
secured all approvals available to it prior to Closing from the appropriate
federal, state, and local governmental or administrative agencies having
jurisdiction thereof required to conclude the proposed transfer of the Assets to
Purchaser pursuant to the terms of this Agreement, and providing, to the extent
applicable, for the continued operation by Purchaser of the Facilities on
substantially the same basis as Seller is currently operating the same.
10.4 Legality, Material Adverse Change, No Change in Law. Seller's sale
of the Assets and assignment of the Assumed Contracts and other assumed
liabilities under Section 2.2 to Purchaser shall not be prohibited by any Legal
Requirement. No Legal Requirement shall have been enacted, nor shall any
legislation have been introduced in either house of the United States Congress
or of the legislature of those states in which the Facilities are located, or
favorably reported for passage to either house of the United States Congress or
of the legislature of such states or by any committee thereof, nor shall have
any investigation by any governmental authority or administrative agency been
commenced, nor shall any decision of any court of competent jurisdiction have
been rendered, nor shall any order by any governmental authority or
administrative agency have been issued, nor shall any event have occurred at any
Facility, which materially and adversely affects, restrains, prevents, or
changes the transactions contemplated by this Agreement, or has a material
adverse effect on the business, operations, assets, prospects, or condition,
financial or otherwise, of any Facility or of Seller.
11. CLOSING.
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11.1 Closing Date. The closing of the transaction contemplated herein
(the "Closing") shall be conducted at the offices of Purchaser's counsel in
Dallas, Texas, on or before August 1, 1998 (the "Closing Date").
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11.2 Seller's Deliveries at Closing. At the Closing, Seller shall
execute (if applicable) and deliver to Purchaser:
(i) The Certificate described in Section 9.2.3
hereof.
(ii) A Special Warranty Deed, a Bill of Sale, an
Assignment of Certain Tangible and Intangible Assets, and
Assignment and Assumption of Services Agreement, an Assignment
of Occupancy Agreements, an Assignment of Leases, and an
Assignment of Patient Trust Accounts for each Facility, each
in form agreeable to the Purchaser, and any appropriate motor
vehicle transfer documents.
(iii) The right to immediate possession of the real
property and all tangible personal property included in the
Assets.
(iv) The opinion of counsel required under Section
9.2.7 hereof.
(v) A Certificate of Existence (or other similar good
standing certification) for Seller issued by the Secretary of
State of the state of Seller's organization and in each states
in which Seller's Facilities are located (dated within thirty
(30) days of the Closing).
(vi) A settlement statement for each Facility as
approved by the parties hereto.
(vii) Partnership resolutions of Seller authorizing
it to undertake the transactions contemplated by this
Agreement and authorizing its signatories to execute this
Agreement and all other documents required to effect the
Closing, certified as of the Closing Date by an officer or
general partner of Seller as having been duly adopted and
being in full force and effect on the Closing Date.
(viii) IRS Form 8594 Asset Acquisition Statement.
(ix) The agreement regarding real estate tax
proration as provided in Section 11.4 hereof.
(x) FIRPTA (nonforeign) Certificate.
(xi) Such other documents as may be required to fully
perform the terms of this Agreement or as may be required by
any Legal Requirement.
11.3 Purchaser's Deliveries at Closing. At the Closing, Purchaser
shall execute (if applicable) and deliver:
(i) The Certificate described in Section 10.1.2
hereof.
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(ii) An Assignment and Assumption Agreement for
each Facility.
(iii) A corporate resolution from Purchaser
authorizing the transactions contemplated by this Agreement
and authorizing its signatories to execute this Agreement and
all other documents required to effect the Closing, certified
as of the Closing Date by a corporate officer of Purchaser as
having been duly adopted and being in full force and effect on
the Closing Date.
11.4 Real Estate and Personal Property Tax Prorations. Real estate
taxes and assessments and personal property taxes ("Taxes") shall be prorated at
the Closing based upon the last available tax duplicate, which prorations shall
thereafter be adjusted directly between Seller and Purchaser based upon the
actual amount of taxes for the year in which the Closing occurs, promptly
following receipt of the official statement therefor and notice thereof by
Purchaser to Seller. The proration agreement set forth herein shall be
incorporated into an agreement in form reasonably satisfactory to Purchaser and
Seller to be executed and delivered by each at Closing. All Taxes shall be
prorated on the accrual basis, Seller being responsible for all Taxes accruing
up to the Closing Date regardless of whether such Taxes are then due and
payable.
11.5 Other Prorations. All expenses attributable to the operation of
each Facility (measured on an accrual basis) through 11:59 p.m. on the day
before the Closing shall be paid for by Seller. Thereafter, such expenses shall
be paid for by Purchaser. All income not received by Seller as of the Closing,
including, but not limited to, all payments under Occupancy Agreements,
including any insurance payments or advances, shall be for Seller's account and
any amount collected from tenants or patients and third party payors with
accounts owing to Seller shall, if collected by Purchaser, be paid over to
Seller. Except as otherwise expressly provided in this Agreement, Seller shall
remain responsible for all accounts payable through 11:59 p.m. on the day before
the Closing. As of the Closing, Seller shall calculate and pay wages, payroll
taxes, and any employee bonuses based upon attendance record or other criteria
accrued through 11:59 p.m. on the day before the Closing. In effecting the
proration, Seller shall be credited for items of expense paid for as of the
Closing Date. In addition, on or about the Closing, Seller shall cause final
utility meter readings to be made for all utilities serving the Premises and
Seller shall pay or cause to be paid all final bills rendered from such meter
readings. To the extent that all items of income and expenses to be transferred,
prorated, or assumed cannot be determined at the Closing, then Seller and
Purchaser shall cooperate with each other to revise the settlement statements
within thirty (30) days after Closing.
All prepaid rental and security deposits and other tenant or patient
funds held in trust by Seller shall be accounted for (including any interest
required on such funds) and transferred to Purchaser at Closing. Seller shall
furnish to Purchaser on or before the Closing a list, by Facility, of all
security and rent deposits and other patient and tenant funds held by Seller,
which list shall also indicate the rent status of each patient or tenant,
certified to by an officer of the general partner of Seller, which list Seller
warrants will be true and correct. Upon transfer thereof at Closing, Purchaser
agrees to maintain, repay and/or return such security and rent deposits in
accordance with the terms and subject to the conditions and requirements under
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which they are now being held by Seller and as imposed by applicable law or
regulation.
12. CASUALTY.
12.1 Major Damage. If any Facility, or a portion thereof, shall be
damaged or destroyed by reason of any casualty or other cause prior to the
Closing, Seller shall give Purchaser written notice of such damage or
destruction within ten (10) days of the occurrence thereof and in all events
prior to the Closing Date. Within twenty (20) days of the occurrence of such
damage or destruction, Seller shall submit to Purchaser Seller's reasonable
estimate of the cost to repair such damage or destruction and its estimate of
the loss of operating revenues due to such damage (collectively, "Seller's
Expense Estimate") and the basis for such estimate. If Seller's Expense Estimate
is equal to or in excess of Twenty Thousand Dollars ($20,000) ("Major Damage")
with respect to any Facility, then Purchaser, at Purchaser's option, may either:
(i) elect, within twenty (20) days after the determination of the repair cost in
accordance with Section 12.3 hereof, to terminate this Agreement, and the
parties shall have no further rights or obligations hereunder, except for those
which expressly survive any such termination; or (ii) proceed to complete the
transactions contemplated under this Agreement and be entitled to the insurance
proceeds payable in the event of such damage or destruction plus any deductible
which shall be paid by Seller to Purchaser at Closing. If Purchaser does not
make the election set forth in subparagraph (i) above within the applicable
twenty (20) day period, then Purchaser shall be deemed to have elected option
(ii) set forth above.
12.2 Other Damage. If Seller's Expense Estimate is less than Twenty
Thousand Dollars ($20,000) for each Facility and such damage or destruction is
covered by Seller's insurance coverage, Seller shall pay such applicable
insurance proceeds, plus the amount of any applicable deductible, to Purchaser
at Closing. If (i) such damage or destruction is not covered by Seller's
insurance coverage, or (ii) such insurance proceeds are insufficient to cover
the cost of repairing such damage or destruction and Seller does not pay such
deficiency to Purchaser at Closing, then the Purchase Price shall be reduced by
an amount equal to the cost of restoring the Premises in the case of
subparagraph (i), or the amount of such deficiency in the case of subparagraph
(ii).
12.3 Determination of Repair Cost. If Purchaser disagrees with Seller's
Expense Estimate, Purchaser shall give written notice of such dispute to Seller
within then (10) days after Seller submits Seller's Expense Estimate to
Purchaser. Upon receipt of such notice, Seller and Purchaser shall promptly
retain an appraiser acceptable to both Seller and Purchaser, the cost of such
appraisal being borne equally by Seller and Purchaser, and such appraiser shall
determine the cost of repairing such damage or destruction and the lost
operating revenues as a result thereof, which cost shall include all
professional fees incurred in connection therewith. Seller and Purchaser agree
that the determination by such appraiser of such costs shall be conclusive as to
both Seller and Purchaser.
13. CONDEMNATION. If, prior to the Closing Date, all or any portion of any
Facility shall be taken by any governmental authority under its power of eminent
domain, Purchaser shall have the option (to be exercised by written notice given
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to Seller not later than twenty (20) business days following Purchaser's receipt
of notice of such taking) to:
(i) Accept the Assets on the Closing date without any
abatement or adjustment in the Purchase Price, in which event
Purchaser shall have the right to participate in any
settlement or compromise with such taking authority and Seller
shall assign its rights in the condemnation award to the
Purchaser (or Purchaser shall receive the condemnation award
from Seller if it has already been paid before the Closing
Date); or
(ii) If, and only if, in Purchaser's reasonable
opinion, any Facility subject to such taking cannot be
operated in substantially the same manner operated by Seller
prior to such taking, Purchaser may elect to terminate this
Agreement, and the parties shall have no further rights or
obligations hereunder, except for those which expressly
survive any such termination.
If the Purchaser does not make the election set forth in subparagraph (ii) above
within the applicable twenty (20) day period, then Purchaser shall be deemed to
have elected option (i) set forth above.
14. DEFAULT. In the event of a material misrepresentation by Seller in this
Agreement, or a material breach of any warranty or covenant in this Agreement,
or other default under this Agreement by Seller prior to Closing, and Seller's
failure to rectify such misrepresentation, breach or default within ten (10)
days after receipt of notice thereof from Purchaser, then Purchaser shall have
the right, upon written notice to Seller, to rescind this Agreement and be
entitled to such remedies as shall be provided by law, including the recovery of
reasonable attorneys' fees.
Seller acknowledges and agrees that the Assets are unique and not
available on the open market and that Purchaser will be seriously and
irreparably injured in the event this Agreement is not specifically performed by
Seller and the transactions contemplated hereby are not consummated. Both
parties further agree that it may be difficult and impractical to measure in
money the damages, which will accrue by reason of a refusal by Seller to perform
their obligations under this Agreement. Therefore, Seller acknowledges and
agrees that, in lieu of rescission and recourse to such remedies as shall be
provided by law, Purchaser shall be entitled to specific performance of this
Agreement by Seller, and Seller hereby consents thereto. In the event that
Purchaser shall institute any actions specifically to enforce Seller's
performance under this Agreement, Seller hereby agrees to waive the defense that
Purchaser has an adequate remedy at law.
15. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All statements of fact
contained in this Agreement, or in any certificate or other document delivered
by or on behalf of one party to this Agreement to the other pursuant to this
Agreement or in connection with the transaction contemplated hereby, shall be
deemed representations and warranties by such party making such statement of
fact. Each party understands that the other party has relied on each said
representations and warranties in entering into this Agreement. Notwithstanding
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any investigations made by or on behalf of Seller or Purchaser or any
distribution in liquidation, dissolution, or other voluntary or involuntary act
of Seller or Purchaser, the representations and warranties contained in this
Agreement shall survive the Closing for a period of twelve (12) months (except
Section 6.3.5 which shall survive for thirty-six (36) months) following the
Closing notwithstanding the execution and delivery of the documents transferring
title to the Assets to Purchaser or the consummation of the other transactions
contemplated herein, whereupon such representations and warranties shall become
unenforceable except to the extent that notice of a claim relating to such
representations and warranties has been given pursuant to Section 16.3 hereof
prior to the expiration of such 12-month period.
16. INDEMNIFICATION PROVISIONS.
--------------------------
16.1 Indemnification of Purchaser. If the Closing occurs, Seller shall
defend, indemnify, and hold harmless Purchaser and any Affiliate of Purchaser
against all damages, punitive damages, civil and criminal monetary penalties,
losses and reasonable expenses, including any reasonable attorneys' and other
professional fees (hereinafter referred to collectively as "Liabilities") in
connection with any of the following matters:
16.1.1 Misrepresentation, Etc.. Any and all Liabilities
arising out of or related to any breach of the agreements,
representations, warranties, or covenants by Seller in this Agreement,
provided, however, that Purchaser's right to indemnification hereunder
for Liabilities arising out of or related to any breach of such
Seller's representations and warranties shall be limited to claims
asserted by Purchaser in accordance with Section 16.3 hereof during the
period during which said representations and warranties survive the
Closing provided under Section 15 hereof.
16.1.2 Audits, Investigations, Refund Obligations, and Other
Pre-Closing Liabilities. Any and all Liabilities arising out of or
related to any of the following: (i) any audit or investigation by any
governmental authority or administrative agency concerning the
operation of any Facility and other Assets owned by Seller prior to the
Closing or any amounts paid to Seller prior to the Closing; (ii) any
assessments, adjustments or offsets made against Purchaser or any
Facility and other Assets owned by Seller as a result of such an audit
or investigation or in connection with the recovery by such
governmental authority or administrative agency of any overpayments
made to Seller for services performed prior to Closing or any
depreciation recapture applicable to the period prior to Closing; (iii)
any reasonable costs of defense of, and any judgment against Purchaser
with respect to, any litigation relating to the operation of the Assets
owned by Seller prior to the Closing; (iv) any suit, claim, or
proceeding brought by any Person (including, without limitation, any
employee or former employee of Seller) of any nature seeking to recover
damages for personal injury, death, or property damage due or alleged
to be due to occurrences in connection with the operation of the Assets
owned by Seller prior to the Closing; and (v) any other liability,
damage, cost, claim, expense, or assessment asserted against Purchaser
or the Assets owned by Seller (other than those liabilities
specifically assumed by Purchaser pursuant to Section 2.2 hereof) as a
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result of, or with respect to Seller's ownership or operation of the
Assets prior to the Closing.
16.1.3 Indemnification Limitation. Anything contained in this
Section 16.1 to the contrary notwithstanding, the obligation of Seller
to indemnify Purchaser hereunder shall arise only at such time as
Purchaser shall have paid the cumulative sum of $10,000 as the result
of any matter or matters occurring under Sections 16.1.1 and 16.1.2
hereof, in which event the indemnity obligations of Seller hereunder
shall exist only to the extent that such payments, in the aggregate,
exceed the sum of $10,000. Seller shall have no obligation to indemnify
the Purchaser for any specific item which is covered by the title
insurance delivered to Purchaser at Closing.
16.2 Indemnification of Seller. If the Closing occurs, Purchaser shall
defend, indemnify and hold harmless Seller and any Affiliate of Seller against
all Liabilities (as defined in Section 16.1 hereof) in connection with any of
the following matters:
16.2.1 Misrepresentations, Etc.. Any and all Liabilities
arising out of or related to any breach of the agreement,
representations, warranties or covenants of Purchaser in this
Agreement, provided, however, that Seller's right to indemnification
hereunder for Liabilities arising out of or related to any breach of
Purchaser's representations and warranties shall be limited to claims
asserted by Seller in accordance with Section 16.3 hereof during the
period during which said representations and warranties survive the
Closing as provided in Section 15 hereof.
16.2.2 Audits, Investigations and Other Post-Closing
Liabilities. Any and all Liabilities arising out of or related to any
of the following: (i) any audit or investigation by any governmental
authority or administrative agency concerning the operation of any
Facility and other Assets by Purchaser subsequent to the Closing or any
amounts paid to Purchaser subsequent thereto; (ii) any assessments,
adjustments or offsets made against Seller as a result of any such
audit or investigation; (iii) any reasonable costs of defense of, and
any judgment against Seller with respect to, any litigation relating to
the operation of the Assets by Purchaser subsequent to the Closing;
(iv) any suit, claim or proceeding brought by any Person of any nature
seeking to recover damages, for personal injury, death or property
damage due or alleged to be due to occurrences in connection with the
operation of the Assets subsequent to the Closing; and (v) any other
liability, damage, cost, claim, expense or assessment asserted against
Seller as a result of, or with respect to, Purchaser's operation of the
Assets subsequent to the Closing.
16.3 Notice and Defense of Claims. A party claiming indemnification
under this Agreement (the "Asserting Party") must promptly notify in writing the
party from which indemnification is sought (the "Defending Party") of the nature
and basis of such claim for indemnification. If such claim relates to a claim,
litigation or other action by a third party against the Asserting Party, or any
fixed or contingent liability to a third party (a "Third Party Claim"), the
Defending Party may elect to assume the defense of the Third Party Claim within
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a reasonable time after receipt of the notice referred to above at its own
expense with counsel selected by the Defending Party and approved by the
Asserting Party, which approval shall not be unreasonably withheld or delayed;
provided, however, that if any claim for indemnification under this Agreement is
covered by the Defending Party's applicable insurance coverage, then the
assumption of such defense and the selection of counsel shall be governed by the
applicable insurance coverage. Subject to the foregoing sentence, the Defending
Party may not assume the defense if the named parties to the Third Party Claim
(including any impleaded parties) include both the Defending Party and the
Asserting Party and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them, in
which case the Asserting Party shall have the right to employ counsel approved
by the Defending Party at the expense of the Defending Party. If the Defending
Party, or the Defending Party's applicable insurer, assumes the defense of the
Third Party Claim, the Defending Party shall not be liable for any fees and
expenses of counsel for the Asserting Party incurred thereafter in connection
with the Third Party Claim.
17. DEFINITIONS. For purposes of this Agreement:
17.1 Cross Reference Table. The following terms defined elsewhere in
this Agreement in the Sections set forth below shall have the respective
meanings therein defined:
Term Definition
"Affiliate Arrangements" Section 6.5.2
"Agreement" Preamble
"Asserting Party" Section 16.3
"Assets" Section 1
"Assumed Contracts" Section 2.2
"Closing" Section 11. 1
"Closing Date" Section 11. 1
"Contracts" Section 6.5.1
"Defending Party" Section 16.3
"Deposit" Section 3
"Effective Date Preamble
"Environmental Testing" Section 8.5
"Existing Site Assessments" Section 8.5
"Facility"; "Facilities" Preamble
"Inspection Period" Section 9.1
"Inventory" Section 1.3
"Labor Contracts" Section 6.5.1
"Liabilities" Section 16.1
"Land" Preamble
"Major Damage" Section 12.1
"Occupancy Agreement" Section 6.5. 1
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"Occupancy Agreement Form" Section 6.5.3
"Permitted Exceptions" Section 4
"PESA" Section 8.5
"Premises" Section 1.1
"Purchase Price" Section 2.1
"Seller" Preamble
"Seller's Annual Financial Statements" Section 6.2
"Seller's Interim Financial Statements" Section 6.2
"Seller's Licenses" Section 6.3.3
"Title Commitment" Section 5
"Title Company" Section 5
"Third Party Claim" Section 16.3
"Warranties & Guarantees" Section 6.4.2
17.2 Affiliate. The term "Affiliate" shall mean (i) any Person directly
or indirectly controlling, controlled by or under direct or indirect common
control with Seller (or other specified Person), (ii) any Person owning or
controlling ten percent (10%) or more of the outstanding voting securities of
such other Person; (iii) any officer, director or partner of such Person, and
(iv) if such other Person is an officer, director or partner, any company for
which such Person acts in such capacity.
17.3 By-laws. The term "By-laws" shall mean all written rules,
regulations and by-laws, and all other documents (other than the Charter),
relating to the management, governance or internal regulation of a Person (other
than an individual) or interpretative of the Charter of such Person, each as
from time to time in effect.
17.4 Charter. The term "Charter" shall mean the certificate or articles
of incorporation or organization, statute, constitution, joint venture or
partnership agreement or articles or other charter documents of any Person
(other than an individual), each as from time to time in effect.
17.5 Code. The term "Code" shall mean the Federal Internal Revenue Code
of 1986 or any successor statute, and the rules and regulations thereunder, and
in the case of any referenced section of any such statute, rule or regulation,
any successor section thereto, collectively and as from time to time amended and
in effect.
17.6 Generally Accepted Accounting Principles. The term "generally
accepted accounting principles" shall mean generally accepted accounting
principles, as defined by the Financial Accounting Standards Board and as
applied by Seller in preparing the Financial Statements and consistently
followed.
17.7 Hazardous Materials. The term "Hazardous Materials" shall mean (i)
any pollutant, contaminant or hazardous substance (within the meaning of such
terms under the federal Comprehensive Environmental Response, Compensation and
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Liability Act of 1980, as amended, and any implementing regulations) but
excepting Infectious Wastes or (ii) any hazardous or toxic substance or material
within the meaning of any federal, state or local law applicable to Seller or
the Premises, but excepting Infectious Wastes.
17.8 Infectious Wastes. For purposes of each Facility, the term
"Infectious Wastes" shall mean such term as it is defined in the Legal
Requirements of the state in which the Facility is located.
17.9 Legal Requirement. The term "Legal Requirement" shall mean any
federal, state, local law, statute, standard, ordinance, code, order, rule,
regulation, resolution, promulgation, or any order, judgment or decree of any
court, arbitrator, tribunal or governmental authority, or any license,
franchise, permit or similar right granted under any of the foregoing, or any
similar provision having the force and effect of law.
17.10 Lien. The term "Lien" shall mean (i) any encumbrance, mortgage,
pledge, lien, charge or other security interest of any kind upon any property or
assets of any character, or upon the income or profits therefrom; or (ii) any
arrangement or agreement which prohibits the creation of such encumbrances,
mortgages, pledges, liens, charges or other security interests or which
restricts transfer of capital stock (other than restrictions on transfer imposed
by applicable securities laws) or other property or assets.
17.11 Person. The term "Person" shall mean any individual, partnership,
corporation, association, trust, joint venture, unincorporated organization, or
entity, and any government, governmental department or agency or political
subdivision thereof.
18. MISCELLANEOUS
-------------
18.1 Headings. Section and subsection headings are not to be considered
part of this Agreement, are included solely for convenience, are not intended to
be full or accurate descriptions of the content thereof and shall not affect the
construction hereof.
18.2 Schedules: Exhibits: Contemplated Transactions. Schedules,
exhibits, agreements and documents referred to in this Agreement are an integral
part of this Agreement. For all purposes of this Agreement, the transactions
contemplated hereby shall be deemed to include, without limitation, all
transactions contemplated by any agreement entered into by Seller and Purchaser
at the Closing.
18.3 Severability. The provisions of this Agreement are severable, and
in the event that any provision hereof should, for any reason, be held invalid
or unenforceable in any respect, it shall not invalidate, render unenforceable
or otherwise affect any other provision hereof, and such invalid or
unenforceable provision shall be construed by limiting it so as to be valid and
enforceable to the maximum extent compatible with, and possible under,
applicable law.
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18.4 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one and the same instrument
18.5 Knowledge of a Party. Whenever reference is made herein to the
knowledge or best knowledge of a party hereto, it is understood that the party
has made, or caused to be made by personnel or representatives reasonably
competent to determine the accuracy thereof (and the results thereof reported to
such party), an inquiry which is reasonably appropriate to determine the
accuracy of the statement in question. Whenever reference is made herein to a
person's "actual knowledge, " it is understood that such Party shall be in
possession of information sufficient to form a belief as to the truth or
accuracy of the statement in question.
18.6 Entire Agreement. This Agreement, the Schedules and Exhibits
hereto, the agreements expressly referred to herein and any agreement making
specific reference to this Agreement embody the entire agreement and
understanding of the parties hereto with respect to the subject matter herein
contained, supersede all prior agreements and understandings relative to the
subject matter hereof. This Agreement may not be changed, modified, terminated
or discharged, in whole or in part (other than in accordance with the respective
terms hereof), except by writing executed by the parties hereto. No waiver of
any of the provisions or conditions of this Agreement or any of the rights of a
party hereto shall be effective or binding unless such waiver shall be in
writing and signed by the party claimed to have given or consented to such
waiver.
18.7 Governing Law. This Agreement shall in all respects be construed
in accordance with and governed by the laws of the State of Texas.
19. ASSIGNMENT. Neither Seller's nor Purchaser's rights and obligations
hereunder shall be assignable without the express written consent of the other
party, except that Purchaser shall have the right to assign its interests herein
to an Affiliate of Purchaser.
20. NOTICES. All notices required to be given hereunder shall be given in
writing to the appropriate party or parties at the following addresses:
To Seller: NHP Retirement Housing Partners I
Limited Partnership
3516 Merrell Road
Dallas, TX 75229
Attn: Robert Lankford
With a copy to: David A. Shelton, Esq.
Lowe Gray Steele and Darko
111 Monument Circle, Suite 4600
Indianapolis, IN 46204-5146
31
<PAGE>
To Purchaser: Capital Senior Living Properties, Inc.
14160 Dallas Parkway Suite 300
Dallas, TX 75240
Attn: David R. Brickman, Vice President
With a copy to: Winston W. Walp II, Esq.
Jenkens & Gilchrist
1445 Ross Avenue, Suite 3200
Dallas, TX 75202-2799
or at such other place as such party may designate in writing to the other
party. All notices shall be delivered either in person or by registered mail,
return receipt requested, and shall be deemed to have been delivered, if in
person upon delivery thereof, or if by registered mail on the date shown on the
return receipt.
21. SUCCESSORS AND ASSIGNS. All of the terms and provisions of this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective transferees, delegatees, heirs, devisees, successors and
permitted assigns.
22. PUBLIC ANNOUNCEMENT. Press releases and other public announcements of the
transactions contemplated herein to be made by either party hereto shall be
subject to the prior review and approval of the other party hereto.
[Remainder of Page Intentionally Left Blank]
32
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
SELLER:
NHP RETIREMENT HOUSING PARTNERS I
LIMITED PARTNERSHIP, a Delaware limited
partnership
By: Capital Realty Group Senior Housing, Inc.,
its general Partner
By: /s/ Robert Lankford
------------------------------------------
Robert Lankford, President
PURCHASER:
CAPITAL SENIOR LIVING PROPERTIES, INC.,
a Texas corporation
By: /s/ Keith Johannessen
------------------------------------------
Printed: Keith Johannessen
Title: President
33
ASSIGNMENT AND AMENDMENT TO
ASSET PURCHASE AGREEMENT
BY AND AMONG
NHP RETIREMENT HOUSING PARTNERS I LIMITED PARTNERSHIP,
CAPITAL SENIOR LIVING PROPERTIES, INC., AND
CAPITAL SENIOR LIVING PROPERTIES 2 - NHPCT, INC.
Effective September 29, 1998
THIS ASSIGNMENT AND AMENDMENT (this "Assignment and Amendment") TO
ASSET PURCHASE AGREEMENT is entered into by and among NHP RETIREMENT HOUSING
PARTNERS I LIMITED PARTNERSHIP, a Delaware limited partnership ("Seller"),
CAPITAL SENIOR LIVING PROPERTIES, INC., a Texas corporation (herein "Assignor")
and CAPITAL SENIOR LIVING PROPERTIES 2 - NHPCT, INC., a Delaware corporation
("Assignee").
Recitals
WHEREAS, Seller and Assignor, as purchaser, entered into that certain
Asset Purchase Agreement dated July 24, 1998 (the "Agreement"), a copy of which
is attached hereto as Exhibit "A" and incorporated herein by reference;
WHEREAS, Assignor desires to assign, and Assignee desires to accept,
all of Assignor's rights as purchaser under the Agreement;
WHEREAS, Seller desires to acknowledge and accept such assignment of
purchaser's interest from Assignor to Assignee; and
WHEREAS, Seller, Assignor and Assignee desire to amend certain
provisions contained within the Agreement;
NOW, THEREFORE, in consideration of the foregoing, and the sum of Ten
and no/100 ($10.00), and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Seller, Assignor and Assignee do
hereby agree as follows:
Agreements
1. Defined Terms. All terms not defined herein shall have the meanings
ascribed to them in the Agreement.
2. Assignor does hereby SELL, ASSIGN, TRANSFER, SET OVER, and CONVEY unto
Assignee, all of Assignor's right, title and interest, as purchaser,
in, to, and under the Agreement (as hereinafter amended). Assignee (i)
does hereby assume all obligations of purchaser under the Agreement,
and (ii) does hereby agree to indemnify and hold harmless Assignor from
and against any and all loss sustained by Assignor and any and all
liability, claims or causes of action (including without limitation,
<PAGE>
all attorneys' fees, costs and expenses) asserted against Assignor
arising under the Agreement from and after the date hereof.
Assignor hereby represents and warrants to Assignee that prior to the
date hereof, it has complied with all of its obligations under the
Agreement, that it is not in default under the Agreement, and that on
the date hereof, the Agreement is in full force and effect and has not
been modified or amended except as hereinafter set forth. Assignor will
reimburse Assignee for and indemnify, defend and hold harmless Assignee
from and against any and all loss sustained by Assignee and any and all
liability, claims or causes of action (including without limitation,
all attorneys' fees, costs and expenses) asserted against Assignee
arising from Assignor's failure to have complied with any of its
obligations under the Agreement or any of its defaults under the
Agreement prior to the date hereof, or any termination or amendment of
the Agreement prior to the date hereof except as shown on Exhibit "A".
Seller hereby acknowledges and accepts the assignment by and between
Assignor and Assignee of purchaser's interest under the Agreement.
3. Section 2.1 of the Agreement shall be amended so that as amended it
shall read as follows:
"Purchase Price. The aggregate purchase price for the Assets
shall be Forty Million Six Hundred Fifty Thousand and 00/100
Dollars ($40,650,000.00) (herein referred to as the "Purchase
Price"), payable by delivery by Purchaser to Seller of a
promissory note (the "Note"), in the amount of Thirty Two
Million Five Hundred Twenty Thousand and 00/100 Dollars
($32,520,000.00), and the remainder payable by Purchaser to
Seller in cash at Closing."
The form of the Note is attached to this Assignment and Amendment as
Exhibit "B".
4. The second sentence of Section 2.2 of the Agreement shall be amended so
that as amended it shall read as follows:
"Notwithstanding anything to the contrary contained herein,
the liens and other related security regarding the Pension
Notes secured by the Facilities (the "Mortgage") shall be
released simultaneously with and utilizing the proceeds from
the payment of the Note by Purchaser."
3. Section 11.1 of the Agreement shall be amended so that as amended it
shall read as follows:
"Closing Date. The closing of the transaction contemplated
herein (the "Closing") shall be conducted at the offices of
Purchaser's counsel in Dallas, Texas, on or before September
30, 1998 (the "Closing Date")."
<PAGE>
6. The last sentence of Section 11.4 of the Agreement shall be amended so
that as amended it shall read as follows:
"All Taxes shall be prorated on the accrual basis, Seller
being responsible for all Taxes accruing up to and including
the Closing Date regardless of whether such Taxes are then due
and payable."
7. The first paragraph of Section 11.5 of the Agreement shall be amended
so that as amended it shall read as follows:
"All expenses attributable to the operation of each Facility
(measured on an accrual basis) through 11:59 p.m. on the day
of the Closing shall be paid for by Seller. Thereafter, such
expenses shall be paid for by Purchaser. All income not
received by Seller as of the Closing, including, but not
limited to, all payments under Occupancy Agreements, including
Medicare and Medicaid reimbursement and other insurance
payments or advances shall be for Seller's account and any
amount collected from tenants or patients and third party
payors with accounts owing to Seller shall, if collected by
Purchaser, be paid over to Seller. Except as otherwise
expressly provided in this Agreement, Seller shall remain
responsible for all accounts payable through 11:59 p.m. on the
day of the Closing. As of the Closing, Seller shall calculate
and pay wages, payroll taxes, and any employee bonuses based
upon attendance record or other criteria accrued through 11:59
p.m. on the day of the Closing. In effecting the proration,
Seller shall be credited for items of expense paid for as of
the Closing Date. In addition, on or about the Closing, Seller
shall cause final utility meter readings to be made for all
utilities serving the Premises and Seller shall pay or cause
to be paid all final bills rendered from such meter readings.
To the extent that all items of income and expenses to be
transferred, prorated, or assumed cannot be determined at the
Closing, then Seller and Purchaser shall cooperate with each
other to revise the settlement statements within thirty (30)
days after Closing."
8. Multiple Counterparts. This Assignment and Amendment may be signed by
the parties in counterparts, and when taken together shall be deemed an
original Assignment and Amendment.
9. Full Force and Effect. Except as amended and/or modified herein, the
Agreement shall remain unchanged and in full force and effect.
[Remainder of page left intentionally blank]
<PAGE>
IN WITNESS THEREOF, the parties hereto have executed this Assignment
and Amendment effective as of the day and year first above written.
SELLER
------
NHP RETIREMENT HOUSING
PARTNERS I LIMITED PARTNERSHIP
By: Capital Realty Group Senior Housing, Inc.,
its general partner
By: /s/ Robert Lankford
------------------------------------------
Name: Robert Lankford
Title: President
ASSIGNOR:
--------
CAPITAL SENIOR LIVING PROPERTIES, INC.,
a Texas corporation
By: /s/ David R. Brickman
------------------------------------------
Name: David R. Brickman
Title: Vice President
ASSIGNEE:
--------
CAPITAL SENIOR LIVING
PROPERTIES 2 - NHPCT, INC.,
a Delaware corporation
By: /s/ David R. Brickman
------------------------------------------
Name: David R. Brickman
Title: Vice President
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CAPITAL SENIOR LIVING PROPERTIES 2-NHPCT, INC.
(Borrower)
and
LEHMAN BROTHERS HOLDINGS INC.
d/b/a LEHMAN CAPITAL, a division of
LEHMAN BROTHERS HOLDINGS INC.
(Lender)
--------------------------
LOAN AGREEMENT
--------------------------
Dated: As of September 30, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Page
1. The Note and the Security Instruments....................................................................2
2. Loan Documents...........................................................................................2
3. Lock-box Account.........................................................................................2
4. Replacements and Replacement Reserve.....................................................................3
5. Required Repairs; Required Repair Funds..................................................................8
6. Events of Default........................................................................................9
7. Sale of Notes and Securitization; Indemnification.......................................................10
8. Incorporation of Provisions.............................................................................11
10. Representations and Warranties..........................................................................12
11. Construction of Agreement...............................................................................12
12. Parties Bound, Etc......................................................................................12
13. Waivers.................................................................................................12
14. Governing Law...........................................................................................13
15. Severability............................................................................................13
16. Notices.................................................................................................13
17. Fees and Expenses.......................................................................................13
18. Modification............................................................................................13
19. No Oral Agreements......................................................................................13
20. Definitions.............................................................................................14
21. Limited Recourse........................................................................................14
</TABLE>
-i-
<PAGE>
THIS LOAN AGREEMENT made as of the 30th day of September, 1998
between CAPITAL SENIOR LIVING PROPERTIES 2-NHPCT, INC., a Delaware corporation,
having an office at 14160 Dallas Parkway, Suite 300, Dallas, Texas 75240
(hereinafter referred to as "Borrower") and LEHMAN BROTHERS HOLDINGS INC. d/b/a
LEHMAN CAPITAL, a division of LEHMAN BROTHERS HOLDINGS INC., a Delaware
corporation having an office at Three World Financial Center, New York, New York
10285 (hereinafter referred to as "Lender");
W I T N E S S E T H :
WHEREAS, at the request of Borrower, Lender has agreed to fund
to Borrower a loan in the principal amount of $60,000,000.00 (the "Loan")
pursuant to the terms of this Agreement;
WHEREAS, the Loan is evidenced by that certain note of even
date herewith made by Borrower to Lender in the original principal amount of
$60,000,000.00 (the "Note") to be secured by multistate originals of a Mortgage
and/or Deed of Trust, as the case may be, each of even date herewith, made by
Borrower and securing the Loan (collectively, the "Security Instruments"),
covering four (4) parcels of land more fully described in Schedule A attached
hereto and made a part hereof (individually, a "Parcel" and collectively, the
"Parcels");
WHEREAS, at the request of Borrower, Lender has agreed, among
other things, to (i) permit Borrower to obtain additional advances by adding
certain additional properties to the lien of the Security Instruments and (ii)
provide the establishment of a lockbox account upon the occurrence of an Event
of Default (defined herein) under the Loan Documents (defined below).
NOW, THEREFORE, in consideration of ten dollars ($10) and
other good and valuable consideration, the receipt of which is hereby
acknowledged, Lender and Borrower hereby covenant and agree as follows:
1. The Note and the Security Instruments. The indebtedness of Borrower shall be:
(i) evidenced by the Note, and (ii) secured by, among other things, (a) the
Security Instruments made by Borrower covering the fee estate of Borrower, in
each Parcel, the Improvements (as such term is defined in the Security
Instruments) located on each Parcel and other property, rights and interests of
Borrower in the same (individually, a "Property" and collectively, the
"Properties"), and (b) assignments of leases and rents each given by Borrower to
Lender dated the date hereof and covering the Properties (the "Assignments of
Rents").
2. Loan Documents. The term "Loan Documents" as used in this Agreement shall
collectively mean the Note, the Security Instruments, the Assignments of Rents,
the Assignments of Agreements, Permits and Contracts, the Environmental
Indemnity Agreement, and the Conditional Assignment of Management Agreement and
Subordination of Management Fees, each dated the date hereof between Borrower
and Lender, this Agreement and all other documents and instruments of any nature
whatsoever executed or delivered in connection with the Loan.
<PAGE>
3. Lock-box Account.
----------------
(a) Upon the occurrence and continuance of an Event of Default (as
defined in the Security Instruments), Borrower shall establish and maintain a
segregated Eligible Account (defined below) (the "Lockbox Account") to be held
by Lender, which Lockbox Account shall be under the sole dominion and control of
Lender. Borrower hereby grants to Lender a first priority security interest in
the Lockbox Account and all deposits at any time contained therein and the
proceeds thereof and will take all actions necessary to maintain in favor of
Lender a perfected first priority security interest in the Lockbox Account,
including, without limitation, executing and filing UCC-1 Financing Statements
and continuations thereof. Borrower will not in any way alter or modify the
Lockbox Account and will notify Lender of the account number thereof. Lender and
or its designated agent shall have the sole right to make withdrawals from the
Lockbox Account and all costs and expenses for establishing and maintaining the
Lockbox Account shall be paid by Borrower.
(b) Upon the establishment of the Lockbox Account, Borrower shall, or
shall cause the Manager (as defined in the Security Instruments) to, deposit the
Rents (as defined in the Security Instruments) directly into the Lockbox
Account, and Borrower shall deliver written instructions to all tenants under
Leases (as defined in the Security Instruments) and credit card companies to
deliver all Rents payable thereunder directly to the Lockbox Account. Borrower
shall, and shall cause each Manager, to deposit all amounts received by Borrower
or Manager constituting Rents into the Lockbox Account within one (1) Business
Day of receipt thereof.
(c) All funds on deposit in the Lockbox Account shall be applied by
Lender to the payment of any amounts then due and payable under the Loan
Documents in such order and priority as Lender in sole discretion shall
determine.
(d) The insufficiency of funds on deposit in the Lockbox Account shall
not absolve Borrower of the obligation to make any payments, as and when due
pursuant to this Agreement and the other Loan Documents, and such obligations
shall be separate and independent, and not conditioned on any event or
circumstance whatsoever.
(e) The following capitalized terms shall have the meanings set forth
below:
"Eligible Account" shall mean a separate and identifiable
account from all other funds held by the holding institution that is either (i)
an account or accounts maintained with a federal or state-chartered depository
institution or trust company which complies with the definition of Eligible
Institution (defined below) or (ii) a segregated trust account or accounts
maintained with a federal or state chartered depository institution or trust
company acting in its fiduciary capacity which, in the case of a state chartered
depository institution or trust company is subject to regulations substantially
similar to 12 C.F.R. ss.9.10(b), having in either case a combined capital and
surplus of at least Fifty Million and No/100 Dollars ($50,000,000) and subject
to supervision or examination by federal and state authority. An Eligible
Account will not be evidenced by a certificate of deposit, passbook or other
instrument.
"Eligible Institution" shall mean a depository institution or
trust company the short term unsecured debt obligations or commercial paper of
which are rated at least A-1 by Standard & Poor's Ratings Group, P-1 by Moody's
2
<PAGE>
Investors Service, Inc., D-1 by Duff & Phelps Credit Rating Co. and F-1+ by
Fitch Investors Service, L.P. in the case of accounts in which funds are held
for thirty (30) days or less (or, in the case of accounts in which funds are
held for more than thirty (30) days, the long term unsecured debt obligations of
which are rated at least "AA" by Fitch Investors Service, L.P., Duff & Phelps
Credit Rating Co. and Standard & Poor's Ratings Group and "Aaa" by Moody's
Investors Service, Inc).
4. Replacements and Replacement Reserve.
------------------------------------
(a) Commencing on the first Payment Date (as defined in the Note) and
on each Payment Date thereafter, Borrower shall pay to Lender an amount (the
"Replacement Reserve Monthly Deposit") equal to $20,137.00, to be applied to
maintain and replace certain items used in connection with the operation of each
Property, which items are more particularly described on Schedule B attached
hereto and made a part hereof (collectively, the "Replacements"), and amounts so
deposited shall hereinafter be referred to as the "Replacement Reserve Fund".
Lender will maintain the Replacement Reserve Fund in an interest bearing
segregated account (the "Replacement Reserve Account") with all interest accrued
to be held for the benefit of Borrower.
(b) Intentionally deleted.
(c) Borrower hereby grants a first priority security interest to
Lender, as security for payment of all sums due under the Loan and the
performance of all other terms, conditions and provisions to be paid and
performed, of all Borrower's right, title and interest in and to the Replacement
Reserve Fund and the Replacement Reserve Account and shall execute and deliver
to Lender such UCC-1 Financing Statements and other documents or instruments as
Lender may request in order to grant and perfect such security interest.
Borrower shall not, without obtaining the prior written consent of Lender,
further pledge, assign or grant any security interest in the Replacement Reserve
Fund or the Replacement Reserve Account or permit any lien or encumbrance to
attach thereto, or any levy to be made thereon, or any UCC-1 Financing
Statements, except those naming Lender as the secured party, to be filed with
respect thereto. Upon the occurrence of an Event of Default, Lender may apply
any sums then present in the Replacement Reserve Fund to the payment of the Debt
(as defined in the Security Instruments) in any order in its reasonable
discretion. Until expended or applied as above provided, the Replacement Reserve
Fund shall constitute additional security for the Debt.
(d) (i) After the commencement of Borrower's obligation to make the
Replacement Reserve Monthly Deposit pursuant to Section 4(a), Lender shall make
disbursements from the Replacement Reserve Account to pay Borrower only for
Replacements. Lender shall not be obligated to make disbursements from the
Replacement Reserve Account to pay for or to reimburse Borrower for the costs of
routine maintenance (other than the regular replacement of furniture, fixtures
and equipment constituting Replacements or as permitted pursuant to Section 4(e)
hereof) to an individual Property or for costs which are to be reimbursed from
the Required Repair Fund (as such term is defined in Section 5 of this
Agreement).
(ii) Lender shall, upon written request from Borrower and
satisfaction of the requirements set forth in Section 4(a) of this
Agreement, disburse to Borrower amounts from the Replacement Reserve
3
<PAGE>
Account to pay for the actual approved costs of Replacements within ten
(10) days of Lender's receipt of a request for disbursement in
accordance with Section 4(d). In no event shall Lender be obligated to
disburse funds from the Replacement Reserve Account if an Event of
Default exists.
(e) Each request for disbursement from the Replacement Reserve Account
shall be in a form specified or approved by Lender and shall certify as to (i)
the specific Replacements for which the disbursement is requested, (ii) the
quantity and price of each item purchased, if the Replacement includes the
purchase or replacement of specific items, (iii) the price of all materials
(grouped by type or category) used in any Replacement other than the purchase or
replacement of specific items, and (iv) the cost of all contracted labor or
other services applicable to each Replacement for which such request for
disbursement is made. With each request for disbursement, Borrower shall certify
that all Replacements that were the subject of the prior request for
disbursement, if any, have been made in accordance with all applicable Legal
Requirements (defined below) of any Governmental Authority (defined below)
having jurisdiction over the applicable Individual Property to which the
Replacements are being provided. Each request for disbursement shall include
copies of invoices for all items or materials to be purchased and all contracted
labor or services to be provided in connection with the Replacements for which
the disbursement is requested. Each request for disbursement shall include a
statement setting forth each person or entity that supplied materials or labor
in connection with Replacements that were the subject of the prior request for
disbursement, if any, and setting forth the amount paid to each such person
pursuant to a prior request and shall include evidence satisfactory to Lender of
payment of all such amounts or other evidence of completion (or in good faith
actively proceeding towards completion) the Replacements for which the prior
request for disbursement was made, if any, which evidence shall be satisfactory
to Lender in its reasonable discretion. Prior to Borrower's making of the
initial Replacement Reserve Monthly Deposit in accordance with Section 4(a) or
thereafter with respect to any calendar month during which a request for
disbursement from the Replacement Reserve Fund is not submitted to Lender
pursuant to this Section 4(e), Borrower shall deliver to Lender, as a part of
the monthly reports to be delivered pursuant to Section 3.11 of the Security
Instruments, an Officer's Certificate setting forth the amounts paid during the
preceding calendar month for Replacements and setting forth each Person to whom
such amounts were paid, the amount paid to each such Person and the related
Replacement provided by each such Person.
(f) Intentionally deleted.
(g) Borrower shall not make a request for disbursement from the
Replacement Reserve Account more frequently than once in any calendar month.
(h) Borrower shall make Replacements when required in order to keep
each individual Property in condition and repair consistent with other senior
living facilities, as applicable, in the same market segment which the
respective individual Property is located, and to keep each individual Property
or any portion thereof from deteriorating. Borrower shall complete all
Replacements in a good and workmanlike manner as soon as practicable following
the commencement of making each such Replacement.
(i) Lender reserves the right, at its option, to approve in its
reasonable discretion all material contracts or work orders with materialmen,
mechanics, suppliers, subcontractors, contractors or other parties providing
4
<PAGE>
labor or materials in connection with the Replacements. Upon Lender's request
following an Event of Default, Borrower shall assign any contract or subcontract
to Lender.
(j) Following an Event of Default, in the event Lender determines in
its reasonable discretion that any Replacement is not being performed in a
workmanlike or timely manner or that any Replacement has not been completed in a
workmanlike or timely manner, Lender shall have the option to withhold any
further disbursements from the Replacement Reserve Account and, upon ten (10)
days prior written notice, to proceed under existing contracts or to contract
with third parties to complete such Replacement and to apply the Replacement
Reserve Fund toward the labor and materials necessary to complete such
Replacement and, without providing any prior notice to Borrower, to exercise any
and all other remedies available to Lender upon an Event of Default hereunder.
(k) Borrower grants Lender, following an Event of Default, the right to
enter onto any individual Property during reasonable hours and subject to the
rights of any tenant in possession of the Property in accordance with the terms
of the Security Instruments and perform any and all work and labor necessary to
complete or make the Replacements and/or employ watchmen to protect such
individual Property from damage. All sums so expended by Lender shall be deemed
to have been advanced under the Loan to Borrower and secured by the Security
Instruments. For this purpose Borrower constitutes and appoints Lender its true
and lawful attorney-in-fact with full power of substitution to complete or
undertake the Replacements in the name of Borrower. Such power of attorney shall
be deemed to be a power coupled with an interest and cannot be revoked. Borrower
empowers said attorney-in-fact following an Event of Default as follows: (i) to
use any funds in the Replacement Reserve Account for the purpose of making or
completing the Replacements; (ii) to make such additions, changes and
corrections to the Replacements as shall be necessary or desirable to complete
the Replacements; (iii) to employ such contractors, subcontractors, agents,
architects and inspectors as shall be required for such purposes; (iv) to pay,
settle or compromise all existing bills and claims which are or may become liens
against any individual Property, or as may be necessary or desirable for the
completion of the Replacements, or for clearance of title; (v) to execute all
applications and certificates in the name of Borrower which may be required by
any of the contract documents; (vi) to prosecute and defend all actions or
proceedings in connection with any individual Property or the rehabilitation and
repair of any individual Property; and (vii) to do any and every act which
Borrower might do in its own behalf to fulfill the terms of this Agreement.
(l) Nothing in this Section 4 shall: (i) make Lender responsible for
making or completing the Replacements; (ii) require Lender to expend funds in
addition to the Replacement Reserve Fund to make or complete any Replacement;
(iii) obligate Lender to proceed with the Replacements; or (iv) obligate Lender
to demand from Borrower additional sums to make or complete any Replacement.
(m) Borrower shall permit Lender and Lender's agents and
representatives (including, without limitation, Lender's engineer, architect, or
inspector) or third parties making Replacements pursuant to this Section 4 to
enter onto each individual Property during normal business hours (subject to the
rights of tenants under their Leases) to inspect the progress of any
Replacements and all materials being used in connection therewith and to examine
all plans and shop drawings relating to such Replacements which are or may be
kept at each individual Property. Borrower shall cause all contractors and
5
<PAGE>
subcontractors to cooperate with Lender or Lender's representatives or such
other persons described above in connection with inspections described in this
Section 4(m), the completion of Replacements pursuant to Section 4(j) or in
connection with the inspections described in Section 4(n) below.
(n) Following an Event of Default, if Lender has determined in its sole
discretion that any Replacements are not being completed in a timely and
workmanlike manner, Lender may require an inspection of the applicable
individual Property at Borrower's expense prior to making a monthly disbursement
from the Replacement Reserve Account in order to verify completion of such
Replacements. Lender may require that such inspection be conducted by an
appropriate independent qualified professional selected by Lender and/or may
require a copy of a certificate of completion by an independent qualified
professional acceptable to Lender prior to the disbursement of any amounts from
the Replacement Reserve Account. Borrower shall pay the expense of the
inspection as required hereunder, whether such inspection is conducted by Lender
or by an independent qualified professional.
(o) The Replacements and all materials, equipment, fixtures, or any
other item comprising a part of any Replacement shall be constructed, installed
or completed, as applicable, free and clear of all mechanic's, materialman's or
other liens (except for those liens which have been approved in writing by
Lender).
(p) In the event that the prior request for disbursement included any
amount in excess of Two Hundred Fifty Thousand and No/100 Dollars ($250,000) for
any single Replacement requiring construction, installation or completion,
Lender may require Borrower to provide Lender with a search of title to the
applicable individual Property prior to making any additional disbursements from
the Replacement Reserve Account, which search shows that no mechanic's or
materialmen's liens or other liens of any nature have been placed against the
applicable individual Property since the date of recordation of the related
Security Instruments and that title to such individual Property is free and
clear of all liens (other than the lien of the related Security Instruments and
any other liens previously approved in writing by the Lender, if any).
(q) All Replacements shall comply with all applicable Legal
Requirements of all Governmental Authorities having jurisdiction over the
applicable individual Property and applicable insurance requirements including,
without limitation, applicable building codes, special use permits,
environmental regulations, and requirements of insurance underwriters.
(r) In addition to any insurance required under the Loan Documents,
Borrower shall provide or cause to be provided workmen's compensation insurance,
builder's risk, and public liability insurance and other insurance to the extent
required under applicable law in connection with a particular Replacement. All
such policies shall be in form and amount reasonably satisfactory to Lender. All
such policies which can be endorsed with standard mortgagee clauses making loss
payable to Lender or its assigns shall be so endorsed. Certified copies of such
policies shall be delivered to Lender.
(s) It shall be an Event of Default under this Agreement if (A)
Borrower fails to make the initial Replacement Reserve Monthly Deposit in
accordance with this Section 4 or (B) Borrower fails to comply with any other
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provision of this Section 4 and such failure is not cured within thirty (30)
days after prior written notice from Lender. Upon the occurrence of an Event of
Default, Lender may use the Replacement Reserve Fund (or any portion thereof)
for any purpose, including but not limited to completion of the Replacements as
provided in Section 4(j), or for any other repair or replacement to any
individual Property or toward payment of the Debt in such order, proportion and
priority as Lender may determine in its sole discretion. Lender's right to
withdraw and apply the Replacement Reserve Funds shall be in addition to all
other rights and remedies provided to Lender under this Agreement and the other
Loan Documents.
(ii) Nothing in this Agreement shall obligate Lender to apply all or
any portion of the Replacement Reserve Fund on account of an Event of Default to
payment of the Debt or in any specific order or priority.
(t) The insufficiency of any balance in the Replacement Reserve Account
shall not relieve Borrower from its obligation to fulfill all preservation and
maintenance covenants in the Loan Documents.
(u) Borrower shall indemnify Lender and hold Lender harmless from and
against any and all actions, suits, claims, demands, liabilities, losses,
damages, obligations and costs and expenses (including litigation costs and
reasonable attorneys fees and expenses) arising from or in any way connected
with the performance of the Replacements. Borrower shall assign to Lender all
rights and claims Borrower may have against all persons or entities supplying
labor or materials in connection with the Replacements; provided, however, that
Lender may not pursue any such right or claim unless an Event of Default has
occurred and remains uncured.
(v) The following capitalized terms appearing in Section 4 and Section
5 of this Agreement shall have the meanings set forth below:
"Governmental Authority" shall mean any court, board, agency,
commission, office or authority of any nature whatsoever for any
governmental unit (federal, state, county, district, municipal, city or
otherwise) whether now or hereafter in existence.
"Legal Requirements" shall mean, with respect to each individual
Property, all federal, state, county, municipal and other governmental
statutes, laws, rules, orders, regulations, ordinances, judgments,
decrees and injunctions of Governmental Authorities affecting such
individual Property or any part thereof or the construction, use,
alteration or operation thereof, or any part thereof, whether now or
hereafter enacted and in force, and all permits, licenses,
authorizations and regulations relating thereto, and all covenants,
agreements, restrictions and encumbrances contained in any instruments,
either of record or known to Borrower, at any time in force affecting
such individual Property or any part thereof, including, without
limitation, any which may (i) require repairs, modifications or
alterations in or to such individual Property or any part thereof, or
(ii) in any way limit the use and enjoyment thereof.
5. Required Repairs; Required Repair Funds.
---------------------------------------
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(a) Borrower shall perform the repairs at its Properties, as more
particularly set forth on Schedule C hereto (such repairs hereinafter referred
to as "Property Required Repairs"). Borrower shall complete each of the Property
Required Repairs on or before October 1, 1999. On the date hereof, Borrower
shall deposit with Lender an amount equal to $47,350.00 to perform the Property
Required Repairs for each Property in accordance with this Section 5. Amounts so
deposited shall hereinafter be referred to as the "Required Repair Fund". Lender
will maintain the Required Repair Fund in an interest bearing segregated account
(the "Required Repair Account") with all interest accrued to be held for the
benefit of Borrower. Borrower hereby grants a first priority security interest
to Lender, as security for payment of all sums due under the Loan and the
performance of all other terms, conditions and covenants on Borrower's part to
be paid and performed, in all of Borrower's right, title and interest in and to
the Required Repair Fund and the Required Repair Account and shall execute and
deliver to Lender such UCC-1 Financing Statements and other documents or
instruments as Lender may request in order to grant and perfect such security
interest. Borrower shall not, without obtaining the prior written consent of
Lender, further pledge, assign or grant any security interest in the Required
Repair Fund or the Required Repair Account or permit any lien or encumbrance to
attach thereto, to any levy to be made thereon, or any UCC-1 Financing
Statements, except those naming Lender as the secured party, to be filed with
respect thereto. Upon the occurrence of an Event of Default, Lender may apply
any sums then present in the Required Repair Fund to the payment of the Debt in
any order in its reasonable discretion. Until expended or applied as herein
provided, the Required Repair Fund shall constitute additional security for the
Debt.
(b) After Borrower's initial deposit into the Required Repair Account
pursuant to paragraph (a) hereof, Lender shall disburse to Borrower the Required
Repair Funds from the Required Repair Account from time to time upon
satisfaction by Borrower of each of the following conditions: (i) Borrower shall
submit a written request for payment to Lender at least ten (10) days prior to
the date on which Borrower requests such payment be made and specifies the
Property Required Repairs to be paid; (ii) on the date such request is received
by Lender and on the date such payment is to be made, no Event of Default shall
exist and remain uncured; (iii) Lender shall have received a certificate from
Borrower (A) stating that all Property Required Repairs at the applicable
Property funded by the prior requested disbursement, if any, have been or are in
good faith being completed in a good and workmanlike manner and in accordance
with all applicable federal, state and local laws, rules and regulations, (B)
any license, permit or other approval by any Governmental Authority required to
commence and/or complete the Property Required Repairs to be funded by the
requested disbursement have been obtained, (C) identifying each person that will
supply materials or labor in connection with the Property Required Repairs to be
performed at such Property and to be funded by the requested disbursement and
including copies of invoices or statements from each such person or entity
setting forth the costs for such materials or labor, and (D) stating that each
person or entity that supplied materials or labor in connection with the
Property Required Repairs performed at a Property and funded by the prior
requested disbursement, if any, has been paid all amounts to be paid to such
person or entity as set forth in the written request with respect to such prior
requested disbursement and setting forth the amount paid to each such person
and, if such requested disbursement includes amounts constituting the final
payment to any person on account of any Property Required Repairs, such
certificate shall be accompanied by lien waivers or other evidence of payment
satisfactory to Lender and (iv) Lender shall have received such other evidence
as Lender shall reasonably request that the Property Required Repairs at any
Property funded by the prior requested disbursement, if any, have been or are in
good faith being completed and the related costs and expenses have been paid.
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Lender shall not be required to make disbursements from the Required Repair
Account with respect to any such Property more frequently than once per calendar
month and unless such requested disbursement is in an amount greater than Five
Thousand and No/100 Dollars ($5,000) (or a lesser amount if the total amount in
the Required Repair Account is less than Five Thousand and No/100 Dollars
($5,000), in which case only one disbursement of the amount remaining in the
account shall be made) and such disbursement shall be made only upon
satisfaction of each condition contained in this paragraph (b). Prior to
Borrower's initial deposit of funds into the Required Repair Fund in accordance
with paragraph (a) hereof or thereafter with respect to any calendar month
during which a request for payment from the Required Repair Fund is not
submitted to Lender pursuant to this paragraph (b), Borrower shall deliver to
Lender, as a part of the monthly reports to be delivered pursuant to Section
3.11 of the Security Instruments, a certificate setting forth the amounts paid,
if any, during the preceding calendar month for Property Required Repairs and
setting forth each person to whom such amounts were paid, the amount paid to
each such person or entity and the related Property Required Repairs performed
by each such person.
(c) It shall be an Event of Default under this Agreement if (i)
Borrower does not exercise diligent efforts to complete the Property Required
Repairs at each Property by the required deadline for each repair as set forth
on Schedule C, or (ii) Borrower does not make the initial deposit into the
Required Repair Fund in accordance with paragraph (a) hereof. Upon the
occurrence of an Event of Default, Lender, at its option, may withdraw all
Required Repair Funds from the Required Repair Account and Lender may apply such
funds either to completion of the Property Required Repairs at one or more of
the Properties or toward payment of the Debt in such order, proportion and
priority as Lender may determine in its sole discretion. Lender's right to
withdraw and apply Required Repair Funds shall be in addition to all other
rights and remedies provided to Lender under this Agreement and the other Loan
Documents.
6. Addition of Cottonwood and Tesson Properties. Provided that no Event of
Default has occurred and is continuing, Borrower shall have the one time right
(with respect to each of the following Additional Properties (hereinafter
defined)), on or before November 30, 1998 (the "Addition Date") to request (a)
that the assisted living facilities known as (i) Tesson Heights located at 12335
West Bend Drive, St. Louis, Missouri 63128 (the "Tesson Property") and (ii)
Cottonwood Village located at 201 East Mingus Avenue, Cottonwood, Arizona 86236
(the "Cottonwood Property") each as more particularly described on Schedule D
attached hereto and made a part hereof (the Tesson Property and the Cottonwood
Property hereinafter referred to, individually and collectively, as the context
may require, as the "Additional Property"), each to be owned in fee simple by
Borrower, and to be subjected to the lien of a new mortgage, deed of trust, deed
to secure debt or similar security instruments (hereinafter referred to,
individually and collectively, as the context may require, as the "Addition"),
in the same form and substance as the Security Instruments (hereinafter referred
to individually and collectively, as the context may require, as the "Additional
Security Instrument") and to the lien of the Loan Documents, as a first lien
thereon and managed by Manager (as defined in the Security Instruments) pursuant
to the terms of the Management Agreement or a Replacement Management Agreement
(as defined in the Security Instruments) and (b) that Lender make an additional
advance for each Addition of the Tesson Property (the "Tesson Advance") and the
Cottonwood Property (the "Cottonwood Advance"; together with the Tesson Advance,
hereinafter referred to, individually and collectively, as the context may
require, as an "Advance") upon compliance with and conditioned on receipt by
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Lender on or before the Addition Date of each of the following with respect to
each Additional Property:
(a) evidence which would be reasonably satisfactory to a prudent
institutional mortgage lender that the Additional Property is fully operational.
(b) (1) a current appraisal of the Additional Property prepared within
one hundred eighty (180) days prior to the corresponding Advance showing an
appraised value equal to or greater than 125% of the Advance; (2) an aggregate
loan-to-value ratio with respect to the Properties subject to the lien of the
Security Instruments after each Addition not greater than the ratio equal to the
aggregate loan-to-value ratio as of the date hereof with respect to the
Properties immediately prior to the Addition and (3) such other standard
underwriting criteria as Lender may apply in its sole discretion.
(c) an opinion of Borrower's counsel which would be reasonably
satisfactory to a prudent institutional mortgage lender stating that (i) the
Additional Security Instrument and the Loan Documents by which the Additional
Property will be encumbered have been duly authorized, executed and delivered by
such Borrower and are valid and enforceable in accordance with their terms,
subject to bankruptcy and equitable principles exceptions, (ii) Borrower is
qualified to do business and in good standing under the laws of the State where
the Additional Property is located, or that Borrower is not required by
Applicable Law (as defined in the Security Instruments) to qualify to do
business in such state, and (iii) based solely on a certificate of Borrower that
the encumbrance of the Additional Property with the lien of the Additional
Security Instrument and the Loan Documents shall not cause a breach of, or a
default under any agreement, document or instrument to which Borrower is a party
or to which it or its properties are bound or affected.
(d) a certification by the Borrower that (x) the certificates, opinions
and other instruments which have been or are therewith delivered to or deposited
with Lender in connection with the Advance conform to the requirements of this
Agreement and the Security Instruments, and (y) all conditions precedent to the
delivery of the Additional Security Instrument and Loan Documents contained in
this Agreement have been fulfilled.
(e) original executed counterparts of the Additional Security
Instrument and the Loan Documents encumbering the Additional Property and
related collateral, including without limitation, any financing statements or
other documents necessary to grant or perfect Lender's first priority security
interest in the Personal Property (defined in the Security Instruments) located
thereon and the Rents derived therefrom; the principal amount of such Additional
Security Instrument shall equal the face amount of the Note, provided that in
the event that the jurisdiction in which the Additional Property is located
imposes a mortgage recording intangibles or similar tax, and does not permit the
allocation of indebtedness for the purpose of determining the amount of such tax
payable, the principal amount of such Additional Security Instrument shall equal
125% of the Advance for such Additional Advance.
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<PAGE>
(f) a title insurance policy issued by a title insurance company
reasonably satisfactory to the Rating Agencies (or, if a Securitization has not
occurred, to Lender) insuring the lien of the Additional Security Instrument on
the Additional Property, in form and substance which would be reasonably
satisfactory to a prudent institutional mortgage lender insuring that the
Additional Security Instrument is a valid and enforceable first lien on the good
and marketable fee simple estate of Borrower to the Additional Property in an
amount equal to the Advance for such Additional Advance, subject only to
standard and customary exceptions and such other exceptions that would be
reasonably approved by a prudent institutional mortgage lender, together with
such affirmative insurance and other endorsements customarily reasonably
required by a prudent institutional mortgage lender, including a "tie-in" and
first loss endorsement satisfactory to Lender, or, if such endorsement is not
available in the State where the Additional Property is located, insurance in an
amount equal to the greater of one hundred twenty five percent (125%) of the
such Advance or the amount on which mortgage or intangibles tax was paid with
respect to the Additional Security Instrument, together with a "last dollar
endorsement". Such title insurance policy shall not contain any exception for
any state of facts that an accurate survey might show or that a survey made
after the date of the survey referred to in Section 6(l) might show.
(g) intentionally deleted.
(h) evidence which would be reasonably satisfactory to a prudent
institutional mortgage lender to the effect that the Additional Property and the
use thereof are in substantial compliance with the applicable zoning,
subdivision, and all other applicable federal, state or local laws and
ordinances affecting the Additional Property, and that all material building and
operating licenses and permits necessary for the use and occupancy of the
Additional Property as a senior living facility, but not limited to, current
certificates of occupancy, have been obtained and are in full force and effect.
(i) an environmental report dated within six (6) months prior to
delivery which states that the Additional Property does not contain any
Hazardous Substances (as defined in the Security Instrument) in violation of
Environmental Law (as defined in the Security Instrument) or material risk of
contamination from off-site Hazardous Substances.
(j) payment of all reasonable costs and expenses incurred by Lender
including reasonable counsel fees and disbursements in connection with the
addition of the Additional Property as collateral, all recording charges, filing
fees, taxes, or other expenses, including but not limited to intangibles taxes
and documentary stamp taxes in connection with the recording of the Additional
Security Instrument and the lien necessary to grant and perfect Lender a first
priority lien on and security interest in the Additional Property, the Personal
Property located therein and the Rents derived therefrom. In the event that the
State where the Additional Property is located imposes a mortgage recording or
intangibles tax, or similar tax, and does not permit the allocation of
indebtedness for the purpose of determining the amount of such tax payable, if
permitted by applicable law in such jurisdiction, such tax shall be paid on an
amount equal to 125% of the Advance for such Additional Advance.
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<PAGE>
(k) a recent survey of the Additional Property prepared by a land
surveyor licensed in the State where the Additional Property is located pursuant
to the then current American Land Title Association/American Congress of
Surveying and Mapping standards for title surveys and which would be otherwise
reasonably satisfactory to a prudent institutional mortgage lender, provided
that no structural additions to the improvements shown on such survey or new
structures have been made or built since the date of such survey and that there
has been no material change in the legal description of the Additional Property
since the date of such survey, whether due to sales, transfers, condemnation or
otherwise.
(l) evidence indicating whether the Additional Property is located
within a flood plain.
(m) a property inspection report dated within six (6) months of the
Advance prepared by an independent licensed engineer reasonably approved by
Lender, prepared in accordance with standards employed by prudent institutional
mortgage lenders stating, among other things, that the Additional Property is in
good condition and repair and free of material damage or waste and complies in
all material respects with the Americans with Disabilities Act, or which
otherwise reveals a state of fact that would be reasonably satisfactory to a
prudent institutional mortgage lender and provided that adequate reserves
reasonably satisfactory to Lender and the Rating Agencies are established.
(n) annual operating statements and occupancy statements for the
Additional Property for the most recent fiscal year of the owner thereof,
together with a year to date operating statement, current occupancy statements,
and a budget for the current fiscal year, each certified by Borrower, and a
certificate of no adverse change since the date thereof executed by Borrower, in
each case in a form and substance which would be reasonably satisfactory to a
prudent institutional mortgage lender.
(o) original certificates and copies of policies of insurance required
by Lender under the terms of the Additional Security Instrument for the
Additional Property.
(p) evidence of the qualification and good standing of Borrower (and
the principals, if necessary) in the State where the Additional Property is
located unless such qualification is not required in such state by Applicable
Law.
(q) certified copies of all material contracts and agreements relating
to the management, leasing and operation of the Additional Property, including,
without limitation, the Management Agreement, which shall be in a form and
substance which would be reasonably satisfactory to a prudent institutional
mortgage lender in a transaction of similar type.
(r) copies of all material licenses and approvals, if any, required in
connection with the Advance, including evidence that such licenses and approvals
are in full force and effect.
(s) a certificate by Borrower certifying that all of the
representations and warranties contained in the Security Instruments and in the
other Loan Documents, after giving effect to the addition of the Additional
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Property, are true and correct in all material respects with respect to the
Additional Property and that there is no Event of Default hereunder.
(t) UCC Searches with respect to the Additional Property and Borrower
in the State where the Additional Property is located and the jurisdictions
where such person has its principal place of business.
(u) a certified copy of (i) the management agreement for the Additional
Property between Borrower and Manager or (ii) an amendment to the Management
Agreement to include the Additional Property, in either case in a form and
substance that would be reasonably satisfactory to a prudent institutional
lender together with a Conditional Assignment of Management Agreement in the
same form and substance as with respect to the other Properties.
(v) a certificate of Borrower dated the date of the applicable Advance,
certifying (i) the names and true signatures of the incumbent officers of such
person authorized to sign the applicable Loan Documents, (ii) the by-laws of
Borrower as in effect on the date of such Advance, (iii) the resolutions of such
person's board of directors approving and authorizing the execution, delivery
and performance of all Loan Documents executed by such person, and (iv) that
there have been no changes in the certificate of incorporation of such person
since the date of the most recent certification thereof by the appropriate
Secretary of State.
(w) if a Securitization has occurred, an opinion of Borrower's counsel
reasonably satisfactory to Lender stating, among other things, that the tax
qualification and status of the REMIC will not be adversely affected or impaired
as a result of the addition of the Additional Property.
(x) such other certificates, opinions, documents and instruments
relating to the applicable Advance reasonably requested by Lender, its counsel
or the Rating Agencies, and all corporate and other proceedings and all other
documents (including, without limitation, all documents referred to herein and
not appearing as exhibits hereto) and all legal matters in connection with such
Advance shall be reasonably satisfactory in form and substance to Lender in its
reasonable discretion.
(y) if a Securitization has occurred, written confirmation from the
Rating Agencies that the addition of the Additional Property shall not result in
a withdrawal, downgrade or qualification of the then current ratings by the
applicable Rating Agencies of the Securities and otherwise in form and substance
reasonably satisfactory to Lender and its counsel.
Following compliance with the conditions set forth above in
this Section 6, Lender shall fund to an account in Borrower's name, in
accordance with Borrower's written instructions, an Advance for the Additional
Properties which in the aggregate shall not exceed $27,700,000.00. Upon the
addition of the each Additional Property in accordance with the terms and
conditions of this Section 6, such Additional Property shall be deemed a
Property for all purposes under this Agreement.
7. Events of Default.
-----------------
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The term "Event of Default" as used in this Agreement shall have the
meaning ascribed to such term in the Security Instruments.
Upon the occurrence of an Event of Default, and, if Lender shall not
have exercised its option under clause (i) below, during the continuance
thereof, Lender (i) may, at its option and in its sole discretion, declare the
Debt immediately due and payable, and (ii) may pursue any and all remedies
provided for in the Loan Documents, or otherwise available.
8. Sale of Notes and Securitization; Indemnification.
-------------------------------------------------
(a) At the request of the holder of the Note, and, to the extent not
already required to be provided by Borrower under this Agreement, Borrower shall
use reasonable efforts to satisfy the market standards to which the holder of
the Note customarily adheres or which may be reasonably required in the
marketplace or by the Rating Agencies in connection with the sale or transfer of
the Note or participations or other interests therein or, subject to Section
7(c) below, the first successful securitization (such sale, transfer and/or
securitization, the "Securitization") of rated single or multiclass securities
(the "Securities") secured by or evidencing ownership interests in the Note and
the Security Instruments, including, without limitation, to:
(i) (A) provide such financial and other information with
respect to the Properties, the Borrower and the Manager as
is reasonably available to Borrower, (B) provide existing
budgets relating to the Properties and (C) at Lender's
expense, to perform or permit or cause to be performed or
permitted such site inspection, appraisals, market studies,
environmental reviews and reports (Phase I's and, if
appropriate, Phase II's), engineering reports (including
updates of any such information delivered to Lender at the
closing of the Loan) and other due diligence investigations
of the Properties, as may be reasonably requested by the
holder of the Note or the Rating Agencies or as may be
necessary or appropriate in connection with the
Securitization (the "Provided Information"), together, if
customary, with appropriate verification and/or consents of
the Provided Information through letters of independent
auditors or opinions of counsel in form reasonably
acceptable to the Lender and otherwise acceptable to the
Rating Agencies;
(ii) if required by the Rating Agencies, and at Lender's expense,
deliver (A) revised opinions of counsel as to
non-consolidation, due execution and enforceability with
respect to the Property, the Borrower and its constituent
entities and the Loan Documents and (B) revised
organizational documents of the Borrower and its constituent
entities, which counsel opinions and organizational
documents shall be reasonably satisfactory to Lender and the
Rating Agencies;
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(iii)(A) deliver one or more Officer's Certificates certifying
as to the accuracy of all representations made by Borrower
in the Loan Documents as of the date of the closing of the
Securitization setting forth any then existing facts
conflicting with any such representations, (B) deliver
certificates of the relevant Governmental Authorities in all
relevant jurisdictions indicating the good standing and
qualification of each individual Borrower and their
respective general partners or managing members, as
applicable, as of the date of the Securitization and (C)
make such additional representations and warranties as of
the closing date of the Securitization with respect to the
Properties, Borrower, and the Loan Documents as are
customarily provided in securitization transactions and as
may be reasonably requested by the holder of the Note or the
Rating Agencies and consistent with the facts covered by
such representations and warranties as they exist on the
date thereof; and
(iv) execute such amendments to the Loan Documents and establish
and fund such reserve funds as and to the extent provided
herein or as otherwise may be reasonably requested by the
Rating Agencies to effect the Securitization; provided,
however, that the Borrower shall not be required to modify
or amend any Loan Document if such modification or amendment
would (A) change the interest rate, the stated maturity or
the amortization of principal amount of the Loan set forth
herein, or (B) modify or amend any other economic term or
other material term of any Loan Document in a manner that
has a material adverse effect on Borrower.
(b) Borrower understands that certain of the Provided Information and
the financial statements, certificates, reports or information required to be
provided by Borrower to Lender pursuant to Section 3.11 of the Security
Instruments (collectively, the "Required Records") may be included in disclosure
documents in connection with the Securitization including, without limitation, a
prospectus, prospectus supplement or private placement memorandum (each, a
"Disclosure Document") and may also be included in filings with the Securities
and Exchange Commission pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), or the Securities and Exchange Act of 1934, as amended (the
"Exchange Act"), and that such Disclosure Documents may be provided or made
available to investors or prospective investors in the Securities, the Rating
Agencies, and service providers relating to the Securitization and the Initial
Securitization. If required by Lender, Borrower shall review such Disclosure
Document and advise Lender in writing of any required revisions to correct
inaccuracies with respect to the Provided Information and or the Required
Records. In the event that any Disclosure Document is required to be revised
prior to the sale of all Securities, the Borrower will use reasonable efforts to
cooperate with Lender in updating the Disclosure Document by providing all
current information necessary to keep the Disclosure Document accurate and
complete in all material respects. Lender will promptly discontinue the use of
any Disclosure Document upon such holder's receipt of written notice from
Borrower that such Disclosure Document requires revision to correct any
inaccuracy.
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9. Incorporation of Provisions. If the Note, the Security Instruments and the
other Loan Documents conflict with this Agreement, then the conditions,
stipulations, agreements and covenants contained herein shall govern and control
to the same extent and effect as if fully set forth therein until this Agreement
is terminated by the payment in full of the Debt.
10. Further Assurances. Borrower shall on reasonable demand of Lender do any act
or execute any additional documents required by Lender to confirm the lien of
the Security Instruments.
11. Representations and Warranties. Borrower represents and warrants to Lender
as follows:
(a) Borrower is duly qualified to do business in the States in which
the Properties are located unless such qualification is not necessary pursuant
to the applicable laws of the States.
(b) Borrower (and the undersigned representative, if any, of Borrower)
has the full power and authority to execute and deliver this Agreement and the
Loan Documents, and the same constitute the legal, valid and binding obligations
of Borrower.
(c) Borrower is not contemplating either the filing of a petition by it
under any state or federal bankruptcy or insolvency laws or the liquidation of
all or a major portion of such individual Borrower's assets or property, and no
individual Borrower has knowledge of any person contemplating the filing of any
such petition against it.
(d) No statement of fact made by Borrower in this Agreement or in any
of the other Loan Documents contains any untrue statement of a material fact or
omits to state any material fact known to Borrower necessary to make statements
contained herein or therein not misleading. There is no fact presently known to
Borrower which has not been disclosed to Lender which materially and adversely
affects, nor as far as Borrower can foresee, would materially and adversely
affect, any of the Properties or the business, operations or condition
(financial or otherwise) of Borrower.
(e) No part of the proceeds of the Loan will be used for the purpose of
purchasing or acquiring any "margin stock" within the meaning of Regulation U of
the Board of Governors of the Federal Reserve System or for any other purpose
which would be inconsistent with such Regulation U or any other Regulations of
such Board of Governors, or for any purposes prohibited by Legal Requirements or
by the terms and conditions of this Agreement or the other Loan Documents.
12. Construction of Agreement. The titles and headings of the paragraphs of this
Agreement have been inserted for convenience of reference only and are not
intended to summarize or otherwise describe the subject matter of such
paragraphs and shall not be given any consideration in the construction of this
Agreement.
13. Parties Bound, Etc. The provisions of this Agreement shall be binding upon
and inure to the benefit of Borrower, Lender and their respective heirs,
executors, legal representatives, successors and assigns (except as otherwise
prohibited by this Agreement).
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14. Waivers. Lender may at any time and from time to time waive any one or more
of the conditions contained herein, but any such waiver shall be deemed to be
made in pursuance hereof and not in modification thereof, and any such waiver in
any instance or under any particular circumstance shall not be considered a
waiver of such condition in any other instance or any other circumstance.
15. Governing Law. (a) This Agreement shall be deemed to be a contract entered
into pursuant to the laws of the State of New York and shall in all respects be
governed, construed, applied and enforced in accordance with the laws of the
State of New York, provided however, that with respect to the creation,
perfection, priority and enforcement of the lien of the Security Instruments,
and the determination of deficiency judgments, the laws of the State where the
applicable Property is located shall apply.
(b) Any legal action or proceeding with respect to this
Agreement or any other Loan Document and any action for enforcement of any
judgment in respect thereof may be brought in the courts of the State of New
York or of the United States of America for the Southern District of New York,
and, by execution and delivery of this Agreement, Borrower hereby accepts, each
for itself and in respect of its property, generally and unconditionally, the
non-exclusive jurisdiction of the aforesaid courts and appellate courts from any
thereof. Borrower irrevocably consents to the service of process out of any of
the aforementioned courts in any such action or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to Borrower at
its address set forth in Article 16 of the Security Instruments. Borrower hereby
irrevocably waives any objection which it may now or hereafter have to the
laying of venue of any of the aforesaid actions or proceedings arising out of or
in connection with this Agreement or any other Loan Document brought in the
courts referred to above and hereby further irrevocably waives and agrees not to
plead or claim in any such court that any such action or proceeding brought in
any such court has been brought in an inconvenient forum. Nothing herein shall
affect the right of Lender, to serve process in any other manner permitted by
law or to commence legal proceedings or otherwise proceed against Borrower in
any other jurisdiction.
16. Severability. If any term, covenant or provision of this Agreement shall be
held to be invalid, illegal or unenforceable in any respect, this Agreement
shall be construed without such term, covenant or provision.
17. Notices. All notices required to be given under the terms of this Agreement
shall be given in accordance with and to the addresses set forth in Article 16
of the Security Instruments.
18. Fees and Expenses. Borrower shall pay to Lender, upon demand, all expenses
incurred by Lender in connection with the collection of the Debt, the
enforcement of the Loan Documents, and in curing any defaults under the Loan
Documents (including, without limitation, reasonable attorneys' fees, which
shall include attorney's fees incurred in any trial, appellate or bankruptcy
proceeding), with, if any such expenses are past due, interest thereon at a rate
per annum equal to the rate of interest payable pursuant to the Note, provided
that such interest rate shall in no event exceed the maximum interest rate which
Borrower may by law pay, from the date of payment by Lender to the date of
payment to Lender, which sums and interest shall be secured by the Security
Instruments.
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19. Modification. This Agreement may not be modified, amended or terminated,
except by an agreement in writing executed by the parties hereto.
20. No Oral Agreements. ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND
CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT, INCLUDING PROMISES TO
EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE. TO PROTECT YOU (BORROWER(S)) AND
US (CREDITOR) FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH
COVERING SUCH MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND
EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY AGREE IN
WRITING TO MODIFY IT.
21. Definitions. Capitalized terms not defined herein shall have the meaning set
forth in the Security Instruments. In addition to the foregoing, the word
"person" shall include an individual, corporation, partnership, limited
liability company, trust, unincorporated association, government, governmental
authority and any other entity.
22. Limited Recourse. The provisions of Article 14 of the Note are hereby
incorporated by reference to the fullest extent as if the text of such Article
were set forth in its entirety herein.
[NO FURTHER TEXT ON THIS PAGE]
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IN WITNESS WHEREOF, Borrower and Lender have duly executed
this Agreement the day and year first above written.
BORROWER:
CAPITAL SENIOR LIVING PROPERTIES 2-NHPCT, INC., a
Delaware corporation
By: /s/ Lawrence A. Cohen
-----------------------------------------
Name: Lawrence A. Cohen
Title: Chief Financial Officer
<PAGE>
LENDER:
LEHMAN BROTHERS HOLDINGS INC. d/b/a LEHMAN
CAPITAL, a division of LEHMAN BROTHERS HOLDINGS
INC., a Delaware corporation
By: /s/ Larry Kravetz
------------------------------------------
Name: Larry Kravetz
Title: Authorized Signatory
Monday October 5, 7:01 a.m. Eastern Time
Company Press Release
Capital Senior Living Corporation Acquires Four Senior Living Communities
DALLAS--(BUSINESS WIRE)--Oct. 5, 1998--Capital Senior Living Corporation
(NYSE:CSU news), one of the country's largest developers and operators of senior
living communities, has purchased four senior living communities from NHP
Retirement Housing Partners I Limited Partnership ("NHP") with a capacity for
706 residents for a cash purchase price of $40,640,000, according to Jeffrey L.
Beck, Chief Executive Officer of Capital Senior Living Corporation.
The four communities acquired by the Company are The Atrium of Carmichael in
Carmichael, California; Crosswood Oaks in Citrus Height, California; The
Heatherwood in Southfield, Michigan; and Veranda Club in Boca Raton, Florida.
The Company has operated the communities under a long-term management contract
since 1992 and owns 33 percent of the outstanding pension notes issued by NHP.
The average occupancy of the four communities is 95 percent. The residents in
each of the communities enjoy amenities such as gracious living areas, a beauty
parlor/barber shop, a library, exercise rooms, broad range of activity and
recreational programs and attractively landscaped grounds. The communities also
provide meal service, housekeeping, transportation, emergency call response, and
personal care services.
"We are pleased to increase our ownership in these four communities to 100
percent," commented James A. Stroud, Chief Operating Officer. "Originally, we
anticipated acquiring the remaining interests in the pension note debt of the
communities and benefiting from the interest earned on the notes. This
acquisition will allow us to report the operating results of those communities,
which we have managed since 1992. This is a further step in our previously
announced plans to fully consolidate the ownership of the communities we operate
and in which we own partial interests."
Lawrence A. Cohen, Chief Financial Officer, added, "Completing these
consolidations will strengthen our balance sheet and enhance our quality of
earnings. This acquisition is expected to add approximately $11.6 million to our
resident revenue and approximately $4 million to our earnings before interest,
taxes, depreciation and amortization (EBITDA) in the next twelve months. This is
after taking into account the elimination of approximately $1.2 million in
management fee revenue previously earned from these four communities." Mr. Cohen
also stated, "As a result of this transaction, approximately $7.5 million of
principal and $5.3 million of deferred interest on the NHP pension notes owned
by the Company will be repaid through 2001. In addition, the Company will
continue to earn interest on approximately $6.6 million of the outstanding NHP
pension notes that mature in 2001."
Capital Senior Living Corporation is one of the country's largest developers and
operators of senior living communities. The Company currently operates 33
communities in 17 states with a capacity of approximately 5,400 residents. Later
<PAGE>
this month, the Company plans to close the previously announced acquisition of
two communities, Gamercy Hill and Tesson Heights, with a capacity of 358
residents. The Company currently has 29 communities under construction or
development, which will have a capacity of approximately 4,500 residents,
including 22 new Waterford Communities with a capacity of approximately 3,100
residents. The Company is negotiating terms for additional sites. The Company is
also expanding 9 existing communities to accommodate approximately 600
additional residents. Upon completion of these acquisitions, developments and
expansions, the Company is expected to double its capacity to approximately
11,000 residents. Further additional growth in capacity is expected to result
from acquisitions of existing communities. The Company's operating philosophy
emphasizes a continuum of care, which integrates independent living, assisted
living and personal care to provide residents with the opportunity to age in
place.
The forward-looking statements in this release are subject to certain risks and
uncertainties that could cause results to differ materially, including, but not
without limitation to, the Company's ability to find suitable acquisition
properties at favorable terms, financing, licensing, business conditions, risks
of downturns in economic conditions generally, and satisfaction of closing
conditions such as those pertaining to licensure. These and other risks are
detailed the Company's reports filed with the Securities and Exchange
Commission.
For further information, contact Scott Shamblin, Director of Investor Relations,
972-770-5600.
